The Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Euro (GBP/EUR) exchange rates were all trading higher as the UK watched the Conservative party travel on course to win the majority of British votes.
Our forecast now 329 Con 233 Lab
— Laura Kuenssberg (@bbclaurak) May 8, 2015
Earlier… The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates changed course on Thursday, trending higher despite the ongoing general election volatility, while the Pound Sterling to US Dollar (GBP/USD) exchange rate fell after US Initial Jobless Claims and Continuing Claims figures printed favourably.
UBS commented on the UK general election, saying: ‘No party is likely to “win” as such, and the focus is on whether a workable coalition or minority governemnt will be able to be put together. Levels in GBP/USD implied volatility remain elevated but markets have been unwilling to price in additional uncertainty given the lack of movement in polls and potential outcomes. Nonetheless, this has not stopped GBP/USD making a comeback in April due to the relative changes in policy pricing between the Bank of England and other major economies.’
US Initial Jobless Claims, US Continuing Claims Stats Beat Forecasts – US Dollar (USD) Rallies
The US Initial Jobless Claims figure came in at 265K rather than the 279K forecast, while Continuing Claims reached only 2.2M.
The Pound Sterling to Euro (GBP/EUR), Pound Sterling to Canadian Dollar (GBP/CAD) and Pound Sterling to US Dollar (GBP/USD) exchange rates were all trading lower in Thursday’s European session as the UK general election began and investors weighed up last night’s US Federal Reserve statements.
Federal Reserve Yellen and Lockhart Comment on Interest Rate Hikes
Fed Chairwoman Janet Yellen suggested that when the Federal Open Market Committee (FOMC) does decide to hike interest rates, there will be the very real possibility of global disruption across the financial sector as low interest rates have been in play for so long.
Yellen stated: ‘When the Fed decides it’s time to begin raising rates, these term premiums could move up and we could see a sharp jump in long-term rates. So we’re trying to communicate as clearly about our monetary policy so we don’t take markets by surprise.’
Meanwhile, Atlanta Federal Reserve President Dennis Lockhart suggested that US economic growth was likely to rebound in coming months and that interest rate hikes would be dependent on consumer spending.
Lockhart stated: ‘The near-term growth picture has yet to come into focus. The fundamentals supporting consumption growth seem strong, but consumers seem to be behaving cautiously… Consumers don’t yet seem confident enough to increase discretionary spending.’
‘The incoming data over the coming days, weeks and near-term months must be intensely watched and carefully interpreted. For policymaking purposes the relevant time frame has been foreshortened.’
Lockhart: Will look for direct, confirming evidence of a pickup in consumer spending https://t.co/UvvNP6oQuV
— Atlanta Fed (@AtlantaFed) May 6, 2015
US ADP Employment Change Figure Sinks Below Forecasts – US Change in Non-Farm Payrolls Ahead
However, the outlook isn’t too rosy for the US Dollar at the minute with the Dollar gauge sinking near a three-month low on Thursday ahead of Friday’s US Change in Non-Farm Payrolls data. Wednesday was another disappointing day for the US economy when the ADP Employment Change stat came in at 169K in April, far below the 200K forecast.
While economists have forecast a rise of 230K in April’s US Change in Non-Farm Payrolls data, the likelihood is it will come in below predictions after the ADP figure on Wednesday. It may even prevent the US Unemployment Rate from falling to 5.4% from 5.5% as forecast.
Euro Exchange Rate Forecast to Fluctuate on May 12th when €800 Million Greek IMF Repayment is Due
Meanwhile, the Euro is still trading amid Greek negotiations and questions are being raised over whether the nation’s €800 million International Monetary Fund (IMF) repayment, due on May 12th, will be made. Friday will see Syriza MP’s meet to discuss the progress so far and whether they are willing to compromise on certain areas of reforms.
reading the headlines on #greece is like plucking a damn daisy: we're near a deal, we're nowhere near a deal, we're near a deal…
— Diane Shugart (@dianalizia) May 7, 2015
The Eurozone produced a mixed bag of data on Thursday, beginning with German Factory Orders this morning, which came in at 1.9% in March on the year, in line with forecasts. However, Markit’s German Construction Purchasing Managers Index (PMI) slipped from 53.3 to 51.0 in April, while Markit’s Eurozone Retail PMI rose from 48.6 to 49.5 and the German Retail PMI fell from 53.0 to 52.6.
European Central Bank (ECB) officials will be speaking over the rest of the week which could see the Euro to US Dollar (EUR/USD), Euro to Canadian Dollar (EUR/CAD) and Euro to Pound Sterling (EUR/GBP) exchange rates fluctuate accordingly.
Canadian Dollar (CAD) Exchange Rate awaiting Canadian Unemployment Rate and Net Change in Employment Stats
The Canadian Dollar exchange rate is forecast to fluctuate later in Thursday’s European trading with the release of Canadian Building Permits data. However, the real highlight for the ‘Loonie’ commodity currency this week will be Friday’s Canadian labour market stats.
Canadian Net Change in Employment is forecast to come in at -5.0K in April, while the Canadian Unemployment Rate number is predicted to climb from 6.8% to 6.9%.
Additionally, any crude oil price changes could also impact the Canadian Dollar to Euro (CAD/EUR), Canadian Dollar to US Dollar (CAD/USD) and Canadian Dollar to Pound Sterling (CAD/GBP) exchange rates.
General Election Weighs on Pound Sterling Exchange Rate, GBP/EUR Hits 1.33
As Election Day wears on, the Pound Sterling exchange rate is likely to be extremely volatile. If the Conservative party remains in power at the 2015 election, the Pound Sterling exchange rate could be offered some support. Meanwhile, if a hung parliament or a new government come into power, the GBP/EUR, GBP/USD and GBP/CAD currency pairs could remain softer for longer.
Ed Miliband looking a combination of nervous and excited as he votes with Justine in Doncaster pic.twitter.com/RcSYxNTYed
— Rowena Mason (@rowenamason) May 7, 2015
The UK will have a general idea of who’s going to win the election by around 06:00-7:00 GMT on Friday, which may cause massive Pound Sterling to Canadian Dollar, Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Euro (GBP/EUR) exchange rate movement.
— Robin Brant (@robindbrant) May 7, 2015
UK Trade Balance stats are also out on Friday but it’s likely to be a choppy day for the Pound with or without data.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is trading at 1.8661. The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5416; the Pound Sterling to Euro (GBP/EUR) exchange rate is trading at 1.3746.