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Hanging Parliament causes GBP to take a nose dive

Posted on: June 09, 2017

Can we agree that people in the business of predicting things have had a rough 12 months? After the markets waltzed through the first two-thirds of Super Thursday without much noise, many participants thought it would be an underwhelming day. The ECB left rates unchanged and Draghi stressed the need for continued monetary policy accommodation as inflation is lagging despite economic momentum growing. While former FBI Director Comey made his case, the lack of “smoking gun” according to Republicans and the White House was a win for President Trump in the latest chapter of bizarre ways to look at things in politics.

Finally it was the UK’s turn, and when initial exit polls were released at 3pm MT the prediction of a hung parliament caused GBP to plummet against the crosses. Cable dropping 200 pips in a matter of minutes eventually touching a low of 1.2636 while GBPCAD rocketed down below 1.71 briefly. The Tories will now have to pick up the pieces after losing their majority in a disappointing result and look to form a government with the Democratic Unionist Party. GBP has recovered a bit this morning as participants are hopeful that this new coalition government may lead to a softer Brexit.

For those watching USDCAD, after squeezing higher once the UK exit poll was announced a very strong employment number this morning has caused CAD to strengthen. The economy added 55k jobs overall, with a 77k increase to full time and a 22k decrease in part time workers and an increase in wages. On top of a strong GDP print from last week its good news for the Canadian economy. We remain range bound for the moment however, with 1.3430/40 and 1.3540/50 providing the bands. Oil is always the wildcard, but a break below 1.3430 should open up a test of the May low at 1.3380/90.

  • Yesterday’s NA Range 1.3485 – 1.3516
  • Asia Overnight Range 1.3505– 1.3540
  • London Overnight Range 1.3460– 1.3523


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