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Brexit Briefing: GBP Strengthens as PM May Boosted by Local Election Gains

Brexit Briefing: GBP Strengthens as PM May Boosted by Local Election Gains

2017-05-05 09:45:00
Nick Cawley, Strategist
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Talking Points

- Local election gains point to an increased Conservative majority at the upcoming general election.

- GBPUSD pushes back towards recent 7-month highs but traders wait for the US NFP release (1230 GMT).

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

The early results from the UK local elections show the ruling Conservative Party strengthening its hold on the country, as support for the main opposition party, Labour, falls away.

According to the BBC, at 0800GMT, the Conservatives had control of 10 local authorities and 561 seats, a net gain of 155 seats, while Labour had control of five authorities and 404 seats, a net loss of 125 seats. Results will continue to come in throughout Friday and are seen as a good barometer of the parties’ strengths going into the general election on June 8.

The latest YouGov poll of UK voting intentions (May 2-3 vs. April 27-28) shows the Conservatives increasing their lead to 19 points over Labour.

Brexit Briefing: GBP Strengthens as PM May Boosted by Local Election Gains

GBP continued to push higher against the USD Friday but lost some of its recent gains against a strong EUR. The USD is currently on hold ahead of the latest US Non-Farm Payroll print at 1230 GMT, with traders waiting for commentary from Fed Chair Janet Yellen to see if a rate hike in June is more likely or not. The British Pound is currently trading near its seven-month highs around 1.2940 and is over eight cents higher than its recent low of 1.2109 made on March 13. Traders will also be wary of ‘Super Thursday’ (May 11), when the Bank of England releases its latest monetary policy settings, MPC minutes and the eagerly awaited quarterly Inflation Report.

Chart GBPUSD: Weekly Timeframe (June 2016 – May 5, 2017)

Brexit Briefing: GBP Strengthens as PM May Boosted by Local Election Gains

Chart by IG

Against the EUR, Sterling is slightly weaker as the single currency gains ground on increased expectations of Emmanuel Macron winning the French Presidency by a substantial margin over far-right challenger Marine Le Pen. The latest Elabe poll shows Macron increasing his lead to 62% (+3) against Le Pen at 38% (-3). The results of the election should be known by mid/late Sunday evening (May 7).

Chart EURGBP: Daily Timeframe (January 9 – May 5, 2017)

Brexit Briefing: GBP Strengthens as PM May Boosted by Local Election Gains

Chart by IG

Upcoming GBP Event Risk

Events

Date, Time (GMT)

Forecast

Previous

GBP Halifax House Prices (April)

May 8, 0730 GMT

3.6%

3.8%

GBP Industrial Production (March) Y-o-Y

May 11, 0830 GMT

2.8%

GBP ‘Super Thursday’ inc Interest Rate Decision

May 11, 1100 GMT

0.25%

0.25%

Markets

Index / Exchange Rate

Change (Exchange Hours/GMT Session Rollover)

Market Close/Last

FTSE 100

0.10%

7,258

DAX

-0.17%

12,613

GBP/USD

0.07%

1.29315

EUR/USD

-0.23%

1.09595

EUR/GBP

-0.28%

0.84753

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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