Newsletter – 9th June 2017

Morning Bulletin

UK General Election Results

  • The UK general election has ended in a hung parliament as the Conservatives failed to get a majority.
  • Despite, perhaps surprisingly, gaining 12 seats in Scotland, Theresa May’s party lost a total of 12 seats across the UK with Labour out-performing expectations by gaining 29 seats with two constituencies left to announce their results.
  • With two constituencies left at the time of writing, the Conservatives have won 315 seats, Labour have 261 and SNP have 35.
  • Sterling plummeted last night as the exit poll was announced at 10pm. The poll predicted a hung parliament and substantial gains by the Labour party and this proved to be the case.
  • Over the course of the night, GBP/EUR dropped from 1.1555 to briefly trade below 1.13 before stabilising at it’s current level of 1.1384. GBP/USD dropped from 1.2949 to 1.2674 representing a 2.12% decrease in the value of the pound versus the dollar before ticking back up to around the 1.2720.
  • As we have alluded to in previous newsletters, the markets do not like uncertainty and this result gives rise to many unknowns hence the sterling weakness that we have seen overnight.
  • Political analysts have this morning not only been discussing how this result occurred but how this result will effect Brexit negotiations which are due to start within the next week.
  • The future of PM Theresa May is also a hot topic this morning with some calls for her to resign after what has been described has a ‘disastrous’ election campaign from the Conservatives, including one such call from Labour leader Jeremy Corbyn.
  • It is expected that the Conservatives will approach the Democratic Unionist Party,  which secured 10 seats, to form a coalition government. The DUP stated that they were open to talks with the Conservatives following the release of the exit poll last night.

Yesterday

  • The ECB kept rates and QE on hold yesterday as expected but did cut inflation rate forecasts yesterday. The central bank also increased its forecasts for economic growth.
  • Elsewhere US unemployment claims came in roughly as expected at 245k vs 241k expected.
Today
  • Today’s news will be dominated by the fall out of the election results and its effects on brexit negotiations.
  • UK manufacturing production came in weaker than expected at 0.2% vs 0.8% expected.
  • We are expecting employment data from Canada at 1.30pm in the form of employment change and unemployment rate.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1384 +0.11
GBP/USD 1.2722 -1.75
EUR/USD 1.1171 -0.36
AUD/USD 0.7536 -0.10

 

Time (GMT) Region Data Release Forecast Previous
13:30 CAD Employment Change 11.5 K 3.2K
13:30 CAD Unemployment Rate 6.6% 6.5%