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2017-06-26
Is a change in the BoE’s stance good news for the pound?

During its last rate-setting meeting on the 15th of July, the Bank of England saw 3 out of its 8 members vote in favour of a rate hike. Even though most members were in favour of keeping rates unchanged, the vote hasn’t been this close in six years. To complicate things further, four days later the BoE’s chief economist Andy Haldane delivered a speech in Bradford showing he had converted from dove to hawk (even after voting to keep rates unchanged) mostly due to a stronger outlook for the world economy and the end to fears of deflation. His change was both a surprise to the market and a public disagreement with Mark Carney’s view that it is “not yet the time” to think about raising interest rates. Internal disputes aside, the BoE is not the only Central Bank who seem to be tipping the scales in favour of a...



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2017-06-12
Could Theresa May’s gamble sink sterling?

Last week’s election result in the UK was the latest in a long line of political earthquakes that have shaken financial markets over the last 12 months.  Theresa May’s attempt to stabilize the UK political landscape prior to commencing Brexit negotiations had precisely the opposite effect; the UK now has weakened political leadership and a polarized electorate just as it is about to enter negotiations which will fundamentally re-shape the country’s economy.  However, the effects of unexpected events on currency markets are notoriously difficult to predict; whilst conventional wisdom indicates that the UK election will lead to a weaker pound, it is equally possible to argue that last week’s shock result will push the currency higher. 

 

 

 Let’s start with the obvious.  There are three reasons why the election result could damage the UK economy and lead to a weaker currency:

 

  1. Uncertainty – Markets generally don’t like political uncertainty and the UK now...


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2017-06-05
UK General Election 2017

This week sees the UK public going to the polls for the third time in two years following the EU referendum last year and the last general election back in 2015. Both the previous two events resulted in surprising outcomes and thus also drastic movements in GBP pairs.

 

At the point the general election was announced, 5 weeks ago, the outcome was a foregone conclusion with the Conservatives enjoying a 20+ point lead over Labour in opinion polls. However, since then, things have taken a downturn and although it is still anticipated for a Tory victory, the predicted margin has shrunk considerably in all polls, with some showing just a 3-point lead. This has some investors worried that another surprise outcome could occur again…

 

Picture1

 

Credit: electoralcalculus.co.uk

 

The risk to GBP is nearly all to the downside. A hung parliament would leave the country in real uncertainty, particularly regarding how Brexit negotiations will be...



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