Morning brief for June 9

Morning brief for June 9

Seven weeks ago, prime minister Theresa May called the snap election seeking a stronger mandate in talks over leaving the European Union. Today, while writing this brief, I can hear the Rolling Stones singing in chorus to her “You can always get what you want”.  It had been a catastrophic campaign for her with the Conservatives being on course to fall short of a solid majority. The exit polls pointed, and early official results pointed to a Hung Parliament, with the Conservative forming a government in coalition. This creates another layer of uncertainty ahead of the Brexit negotiations which are due in 10 days.  Sterling fell off a cliff after the announcement of the election results, and now it looks truly vulnerable to further downside. GBP/USD is trading at around 1.2730 at the moment of writing. Ahead there are several supports at 1.2705, 1.2690, 1.2615.

The latest update of the UK election results from Bloomberg.com

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With 646 out of 650 seats declared, the Conservatives had won 314 seats and therefore failed to reach the 326-mark for a solid parliamentary majority. Labour had won 261 seats. 

As for the other risk event of our Super Thursday, they came without too much fanfare.

Former FBI direct James Comey didn’t provide a smoking gun in his testimony. He did contribute to the continuation of the cacophony surrounding the US President. He said that it’s not for him to decide whether his conversation with Trump was an effort to obstruct justice. Also, he confessed that the true reason for his dismissal was the way he conducted the Russia investigation. Donald Trump didn’t like it as it put some pressure on him. Now it is up to the lawyers and Congress to decide whether Comey’s testimony is sufficient for impeachment or not. The strength of the USD reverberated across the trading desk with almost all major currencies lower against the greenback. Perhaps, only the kiwi was an exception. It rose to 0.7222 overnight without a clear reason for such outperformance.

Aussie slipped a few points and slid from 0.7545 to 0.7525 in Tokyo morning. Australian housing finance data showed a reduction in investor lending. From China, we got CPI and PPI figures that came short of market expectations.

EUR/USD dropped below 1.1210 from yesterday’s high at 1.1268 after the ECB policymakers downgraded their headline inflation forecasts having said that underlying inflation has “yet to show convincing sign of pick-up.” They upgraded the risks on economic growth of the Eurozone countries to broadly balance from extremely negative one. In addition, they pledged to continue their asset purchase program until sustained inflation around 2% level.

USD/CAD ticked higher mainly on the pronounced strength of the USD. Oil prices didn’t provide any support to Loonie. Brent oil futures are below $50 mark (at $47.80) as investors are still skeptical about the effect of the OPEC-led production cut deal.  

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