Brexit Briefing: Don’t Forget, For GBP, Politics Remain Important
- However, the continuing importance of domestic UK politics should not be underestimated as the UK Government faces several crucial votes in Parliament later Thursday.
UK Prime Minister Theresa May, who lost her Parliamentary majority in a General Election she did not need to call, is having to dash back from Berlin today after joining German Chancellor Angela Merkel, French President Emmanuel Macron and other European leaders to discuss plans for a G20 summit in Hamburg next week. The reason? A series of Parliamentary votes on the Queen’s Speech outlining her Government’s legislative program.
The program, dominated by Brexit legislation, is almost certain to be approved by Members of Parliament – and three Opposition amendments defeated – after the ruling Conservative Party’s agreement with Northern Ireland’s Democratic Unionist Party that has given May a slim majority. However, the need for May to return to London underlines how important domestic politics continue to be for traders in the British Pound.
Any Parliamentary defeat, which could result in a change of leadership and even a new election, would almost certainly weaken the currency. Moreover, a weak Government would have little leverage in the Brexit talks to determine the terms of the UK’s divorce from the European Union.
This is important as trading in the Pound has been dominated in recent days by speculation that UK monetary policy could be tightened earlier than previously expected. The currency surged to a three-week high yesterday, and the FTSE 100 index of leading London-listed stocks fell, after Bank of England Governor Mark Carney said a UK interest rate rise was probably necessary and that the central bank would debate this “in the coming months”.
Chart: GBPUSD 15-Minute Timeframe (June 28-29, 2017)
Monetary policy will almost certainly remain the most important driver of GBPUSD and GBP crosses in the weeks to come but traders would be wise to keep an eye on the Westminster Parliament too.
|Index / Exchange Rate||Change (Exchange Hours/GMT Session Rollover)||Market Close/Last|
Upcoming UK/EU Event Risk
|Events||Date, Time (GMT)||Forecast||Previous|
|German Retail Sales (MoM) (May)||Jun 30, 0600||0.3%||-0.2%|
|German Retail Sales (YoY) (May)||Jun 30, 0600||2.8%||-0.9%|
|German Unemployment Change (June)||Jun 30, 0755||-10k||-9k|
|German Unemployment Rate s.a. (June)||Jun 30, 0755||5.7%||5.7%|
|UK Current Account (£) (1Q)||Jun 30, 0830||-16.7b||-12.1b|
|UK GDP (QoQ) (1Q F)||Jun 30, 0830||0.2%||0.2%|
|UK GDP (YoY) (1Q F)||Jun 30, 0830||2.0%||2.0%|
|UK Index of Services (MoM) (Apr)||Jun 30, 0830||0.2%||0.2%|
|UK Index of Services (3Mo3M) (Apr)||Jun 30, 0830||0.3%||0.2%|
|UK Total Business Investment (QoQ) (1Q F)||Jun 30, 0830||0.6%|
|UK Total Business Investment (YoY) (1Q F)||Jun 30, 0830||0.8%|
|Euro-Zone CPI Estimate (YoY) (June)||Jun 30, 0900||1.2%||1.4%|
|Euro-Zone CPI – Core (YoY) (June A)||Jun 30, 0900||1.0%||0.9%|
--- Written by Martin Essex, Analyst and Editor
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