Trading plan for 08/06/2017:
Chinese and Japanese data disappointed overnight. The disappointment with the macroeconomic data has contributed to the temporary weakness of the Japanese yen, which is currently the leader in the G10 (0.4%). Weakness of the US dollar is not used by its counterparts from Australia (0.0%) and Canada (0.0%). The Pound Sterling (0.0%) is also a relatively stable part of the session, which remains at 1.2960 early in the European session.
On Thursday 8th of June, the event calendar is busy with important macroeconomic data, but there are only two events that really matter today: ECB interest rate decision and press conference and the parliamentary elections in the United Kingdom.
GBP/USD analysis for 08/06/2017:
Since the morning, citizens of Great Britain are due to make a serious decision, taking part in the snap parliamentary election. Although a few dozen days ago the situation seemed to be a fire-sure win of current Prime Minister Theresa May and her Conservative Party, now such an obvious scenario is no longer so certain. According to the latest YouGov poll, the day before the election, the Tories are now leading the Laborers by 7 pp. Currently, conservatives and laborers can count respectively at 42 percent and 35 percent support. Meanwhile, according to a poll conducted by Survation for ITV television, Prime Minister Theresa May's party can count only 1.1 percent advantage over the Labor Party (the study was conducted ahead of Saturday's terrorist attack in London, which killed seven people and wounded 48). Nevertheless, despite the final results, the new government will have the first task of leading the UK through the process of exiting the European Union, as well as responding to the growing threat of terrorist attacks. The first results of the UK parliamentary elections will be available around 11:00 pm GMT and will have a great impact on financial markets.
The volatility of the British Pound movement will depend on the scale of Theresa May's Conservative Party victory and it is all about the number of seats in the UK parliament:
- more than 125 seats - is a fair reflection of what markets are pricing in - very positive for the Pound
- about 100 seats - successful election - positive for the Pound
- less than 100 seats - would be viewed as a slight disappointment - negative/neutral for the Pound
- more than 50 seats - is still enough for the majority, but overall a disappointment - negative/neutral for the Pound
- fewer than 50 seats - would cause more worries regarding a hard Brexit - negative for the Pound
- fewer than 35 seats - no majority in parliament - negative for the Pound
- fewer than 30 seats - would suggest a smooth Brexit scenario - very negative for the Pound
- fewer than 20 seats - compromisation and failure of Conservatives - deep Pound sell-off
In the GBP/USD Daily time frame chart and FTSE100 Daily time frame chart below, there is a visual representation of possible scenarios.
