The UK general election has been the biggest news factor in the financial markets this past week. The result, although sold as unexpected, probably wasn’t that much of a surprise considering the way other elections have gone in the UK.
However, it naturally added to volatility in the market. The Pound had been steadily falling, so this event was expected to make it move lower.
This has not really happened, although the Pound is down a bit. This does not detract from the underlying view that Sterling is weak. We have said for a while now that the move lower will be a slow process. This does not change. We may even say that the Pound has held up well in this moment of adversity. It was never going to be a one-way move. There is always a chance of a slight retracement, but fundamentally, Sterling is weak and we will see lower levels for sure as the year ticks on.
There is, of course, further uncertainty in the markets and this has to do with Brexit. Negotiations will be difficult for sure, and this uncertainty is one thing that could weigh on the Pound. The target for STG/EUR is now 1.10, but the timing for this is uncertain. In the coming weeks, there will be many differing opinions relating to the Pound’s direction.
Economic news is also one to watch out for. The UK economic figures are pretty inconsistent and the market is watching these with interest. This, along with figures in Europe and the US, will definitely move the markets! In fact, the US Dollar is likely to be the catalyst for many of the moves. This week alone there is a Fed meeting that could well result in a rate rise, perhaps giving the US Dollar some power!
It’s sure to be an eventful few weeks. So hold on to your hat and hope for the best!
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The Premier FX Team
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