Back to the politics…
Despite the events in London Bridge on Saturday night sterling is as solid as London is this morning. The general election due this Thursday will still go ahead and the campaigns that were briefly suspended yesterday will swing back into action this morning. With those campaigns restarting we are also likely to see opinion polls published again and sterling will once again takes its cues from the expected lead of the Conservative party.
Saturday’s Survation poll had the lead down to 1 percentage point – Conservatives 40, Labour 39 – but this poll is relying on 80% of 18-24yr olds voting on Thursday; their turnout typically only reaches around 40%. Elsewhere the average of that plus polls from Opinium, Comres, ORB, Yougov and ICM was a 7 point lead for the Conservative party. As we noted in our webinar last week, these popular polls mean little when translated into the cut and thrust of the First Past the Post system we still think that the Conservatives are sitting on a strong lead of 50-70 seats, mainly driven by a message of her being the best person and having the best team to deal with Brexit.
Prospects for the pound
We do foresee a slight sterling gain on Thursday as the exit polls at 10pm are released should our expectations of how the country will vote prove correct. These exit polls have been extremely accurate in the past and markets will use them as a quasi-result to buy or sell UK assets.
Sterling also has its PMI from the services sector due this morning which will likely show a moderation of the Easter-led strength in the industry and further pressures around price and margin. Similar numbers are due from France, Germany, the Eurozone and the US throughout the day.
Qatar spat pushes oil markets higher
Oil is up and bouncing around following news that Saudi Arabia, the UAE, Bahrain and Egypt have all cut diplomatic ties with Qatar and have asked Qatari citizens to leave their countries in the next week or so. Oil has been falling since the botched supply cut by OPEC and its weakness was extended by Trump’s dismissal of the Paris Accords last week but commodity currencies such as the NOK, CAD, ZAR and AUD all stand to benefit should the contretemps around the Strait of Hormuz continue and choke supply further.
Get ready for a busy Thursday
Elsewhere, the focus is really falling on the end of this week with Thursday seeing a European Central Bank meeting that could easily include a change in language on interest rates allowing for a further push higher by the single currency. Politics watchers, and Twitter, will be tuned into to the testimony of former FBI Director Comey as he sits before the Senate Intelligence Committee that begins at 3pm BST while here in the UK the election will be taking place.