- GBP Slips as Conservative Majority Wiped Out in Latest YouGov Poll;
- Panelbase Poll Claims Otherwise Offering Some Reprieve For GBP;
- EUR Higher as Eurozone Unemployment Falls to Eight Year Low;
- Fed Speakers and US Data Still to Come Today.
US futures are pointing to a flat open on Wednesday, similar to what we’ve seen already in Europe, with focus remaining on the UK election as the June 8 vote nears.
Sterling has been under pressure once again on Wednesday and continues to show its vulnerability to the polls as the election nears. While there has been plenty of evidence of the polls being wrong in the past – most notably during the last election campaign in 2015 – it’s hard to ignore the collapse in Theresa May’s lead over recent weeks. The latest YouGov poll suggests that not only has the Conservative majority been slashed compared to only a couple of weeks ago, it’s disappeared altogether which has triggered further weakness in the pound.
With momentum being very much against the Conservatives, the pound may remain very vulnerable as we near the 8 June vote. The uncertainty that a hung parliament would bring is clearly far from ideal when the country is due to begin Brexit negotiations only 11 days later and this may be contributing to the moves in the currency. Should the pound break below 1.2750 against the dollar, it could trigger further downside for the pair, with 1.27 offering possible support but 1.26 being the next key level.
Interestingly, a poll released later in the morning from Panelbase suggested the Conservative lead still remains very much intact. In fact, it claims it’s been increased compared to two weeks ago, up to 15 points. Under the circumstances, it’s no wonder that people continue to question the reliability of these polls. While the pound has recovered some lost ground following the release, the polls generally do seem to suggest that May’s lead in slipping which could ensure it remains vulnerable to downside moves.
We had some mixed data from the eurozone this morning, with unemployment falling to its lowest level in eight years and further than was expected. The inflation release on the other hand was slightly disappointing, with core inflation falling back to 1%, as expected, but headline inflation falling a little more to 1.4%, from 1.9% previously. This is well below the ECBs target of below but close to 2% but after a brief period of choppiness, the euro appears to have shrugged off the inflation number in favour of the better labour market figures. While the gains aren’t substantial, the euro is trading back around 1.12 against the dollar, which has being something of a ceiling for the pair over the course of this week. Still to come today we’ve got some data from the US, including pending home sales and the Chicago PMI. We’ll also hear from two Fed policy makers – Robert Kaplan and John Williams – with only two weeks to go until its next meeting. As it stands, markets are pricing in almost an 87% chance of a rate hike in two weeks but only a 42% chance of another one this year. That would explain the weakness we’ve seen in the dollar despite June appearing to have never been in doubt.
