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Election fever!

Election fever!

GBP
The British Pound opened lower on Monday as markets reacted to yet another terror attack in London, although it has held within two-day old trading range between 1.2850-1.2900 region.

The latest polls point to a tighter race than previously expected; it was stated that this was the Conservatives’ election to lose and it looks like they are trying their hardest to do so. The dramatic turnaround in opinion polls has rattled market nerves with the Pound implied volatility index jumping higher following the surprise development in the polls. Political headlines will continue to be the only factor driving the Pound ahead of the UK general election this week.

On the economic data front, the release of UK services PMI will again be largely ignored, just as traders shrugged off last week’s upbeat PMI prints (manufacturing and construction PMIs).

With only five days left until Election Day, the British Pound is more likely to ignore the macro data and focus on Conservatives’ lead over Labour.

USD

The US unemployment rate fell to a 16-year low of 4.3%, although this was due to a decline in the participation rate as the number reported to be in employment declined sharply. The monthly increase in average earnings met with expectations at 0.2%, but the annual increase was held at 2.5% as April data was revised lower.

NonFarm Payrolls fell well short of expectations at 138,000 jobs, some 115,000 below Thursday’s ADP projection. ADP was also wildly off the mark in March, estimating 263,000.
March is now revised at 50,000. The GBPUSD pair managed to close the week marginally higher, but below the 1.2900 level, helped by a weaker Greenback and in spite of underlying political woes.

James Comey, former FBI Director, is scheduled to testify on Thursday morning (US time). The markets will be watching for clues as to whether a “Trump Impeachment” has any merit, so political risk is still high.

EUR

Data wise, there is little other than the German trade and factory orders either side of the European Central Bank’s (ECB) meeting, with the Sentix investor index and services PMIs out today. Thursday’s ECB Monetary Policy decision and statement will be a key trading driver. While some in the market expect the ECB to adjust its forward guidance and set the stage for deposit rate hikes next year, the Euro could suffer if it’s another non-event. President Draghi will be all too aware of the impact this will have on the rates, and given the fragility of the economic recovery, his communication will be as guarded as ever.

Date To Watch:
8:00am EUR Markit Services PMI (May), Markit PMI Composite (May).
12:30pm USD Non Farm productivity (Q1), Unit Labour Cost (Q1).
1:45pm USD Markit PMI Composite (May).
3:00pm USD ISM Non-Manufacturing PMI (May), Factory Orders (MoM) (Apr).
3:05pm USD Labor Market Conditions Index (May).

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