Our prop desk is looking relatively quiet although no surprise that some short GBP positions are yielding results. A short DOW trade is still being held open in the expectation that it will move back into the money soon.

Daily Round up

The last trading day of the month is coming with a slew of high profile economic prints, whilst the market is also digesting the latest shock polling ahead of the UK general election. In the wake of Brexit and the US Presidential elections, we’re all too aware of the risk of the pollsters getting it wrong, but the latest from London is doing nothing to help the pound perform a little less like a classic EM currency.

Fundamental Analysis – Sterling rattled by latest opinion polls

The pound slumped again last night as the latest opinion polls over next week’s general election served up a shock for the markets. Current readings now have the Conservative party short of an absolute majority, a complete reversal over the numbers predicted when the election was called back in mid-April and something that is certainly giving the markets food for thought. A slim loss risks the potential of a coalition of all the other opposition parties being formed, leaving the various factions negotiating with one another when the priority should be negotiating with the European Union over Brexit. Currency traders are rightly concerned as to what this means for the pound’s fortunes.

Eurozone inflation is set to be released at 9am GMT this morning and this could provide further direction for the common currency. The expectation is that we’ll see a fall back from recent highs, taking some of the pressure off the ECB in terms of when it talks about unwinding QE but any surprises here would have the potential to deliver another jolt to the market.

US pending home sales data is set for release at 2pm GMT and again this will provide some clues over just how hawkish the Fed needs to be at the next FOMC meeting. The dollar index may have rebounded off recent lows but it remains very much on the back foot. Anything that looks too bullish in this print will lead to concern that the credit market could be overheating and this again will be cause for the central bank to look at interventions, in turn potentially lending further support to the dollar.

USD/CAD has spent the last five weeks working its way lower and the support we appear to have found around 1.3450 may be tested today when the Canada’s latest GDP readings are published. Due at 12.30pm, an annualised print of around 4% is expected which would certainly be considered eye-catching. If it wasn’t for the uncertainty that’s lingering over the prospect of NAFTA renegotiations then the idea of a quick rate hike would seem far more likely but regardless, rapid domestic growth will bring with it the threat of inflationary pressures that will need to be managed.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice