Markets unsettled post election

With the aftermath of the election still sinking in the markets, behaviour has been very much unsettled. Negotiations are still currently in motion with the DUP and the conservatives seeking to officially from a government together. As a result of the ongoing talks between both parties the market still remains highly volatile and Sterling persists in its fragile state. Late yesterday afternoon news broke that a deal is expected to be reached to form a government either today or tomorrow.

From that Sterling made a somewhat timid climb by just under half a cent on the Euro. Theresa May is still under ongoing pressure in the press to throw in the towel after an unsuccessful campaign. However, she remains headstrong vowing that “she got them into this mess and she will get them out”. This still does not bode well with investors of Sterling and as result Sterling remains in limbo and vulnerable to further losses to its competitors. This time last year when Brexit was announced Sterling went into freefall, much like what is happening at the moment due to uncertainty, rates previously plummeted to sub 1.10 levels and should more political unrest continue it is not madness to think we could return to those levels.

Yesterday also saw some positive data come from the UK, Consumer price index posted 0.2% higher than expected at 2.9% but did not give sterling the boost it usually would. With that being said it strongly indicates the market is pure sentiment driven and at this time against the pound. Today there are some high-profile data releases to take note of that will likely shake the rates. Firstly starting in the UK at 9.30am as claimant count rate, average earnings and ILO unemployment rate will be announced.

Over to the US at 1.30pm as retail sales and consumer price index will be posted. Staying in the US as at 6.00pm Janet Yellen will be announcing the FED’s interest rate decision which is expected to be risen from 1% to 1.25%, although this more than likely already priced into the market this is not a given and when the announcement is made expect the markets to still react to the decision. Finally in the late evening New Zealand release GDP figures at 10.45pm.

As always stay in contact with your account manager for friendly guidance and advice for your currency requirements.