Getting Ready to Rumble
Election becoming ever more significant
It is very unlikely that when she decided, against her better judgement, to call a snap election, that Theresa May even considered how close the race would, apparently, become.
It is easy to take opinion poll results with a “pinch of salt” given Cameron, Brexit and Trump but it is the extremely wide margins of victory currently being predicted for the Conservative Party that should concern pollsters.
Yesterday two opinion polls were released. One gave the Government a 1% lead, the other 11%! In the modern era where every “Tom, Dick and Harry” can spout his own opinion as news on social media, the task of sorting fact from fiction is becoming harder and harder!
The pound has, predictably, reacted well to the 11% result. It is possibly quite a good barometer of where the market sees the more likely result that it pretty much disregarded the 1% poll.
Against a buoyant Euro, the pound is holding its own. The 0.8720 level is providing support for the common currency as the Eurozone basks in the glow of political stability and an improving economy.
ECB meeting to set economic tone
The publicity machine that Messrs Juncker and Tusk drive to tell everyone how wonderful life in the EU is will need to be in full force later this week as Mario Draghi continues his refusal to agree the sugar coated version of events.
Yes, the economy is growing, inflation is rising (slowly) and consumer confidence is starting to improve but since Draghi is responsible for the entire region’s economic health he has to consider the “lowest common denominator”. It is employment that continues to be his major concern. It is close to 10% Eurozone-wide with Mediterranean countries still in mid-teens. Youth unemployment is above 30% in a number of countries and it is this lack of new jobs coming through that concerns Draghi.
The Asset Purchase Scheme, created rather unwillingly, was put in place to stimulate the economy and it has been successful but, as with both the FOMC and MPC, there is a reluctance to withdraw support albeit for varying reasons.
The Euro is well entrenched above 1.2900 now versus a dollar slowly succumbing to its own difficulties but an assault on 1.3000 may need a correction before fresh buyers can be attracted to the single currency. It is a similar story for the pound. 0.8720 is proving magnetic. Below that level Sterling sellers emerge and above, buyers.
Something scary this way comes
Apologies to Ray Bradbury for stealing and bastardizing his book title.
It is to be hoped that this seeks events will provide an opportunity for H1 to close on a more positive note for the entire global economy.
A Labour victory, impeachment for Trump and a gloomy read on the Eurozone economy and the world will look an entirely different place.
Brexit is proving to be another scary matter when it should be bringing a sense of challenge and excitement. The extremely vocal contribution of the remain camp refuses to die down even as polls ( I am prepared to believe these ones) show that support for Brexit has grown.
Sterling could be at 1.3500 or 1.2500 and 0.8400 or 0.8900 it really is that hard to predict where we are headed. Liquidity will be the key. Liquidity was the major driver following the Brexit referendum result. There is no way Sterling would have gone from 1.5220 to 1.3230 with normal liquidity.
The final word, as ever, should be given to those with a financial interest in the election. Bookmakers are still favouring a large Conservative majority. Possibly as high as 140 seats.