On the day that British Prime Minister Theresa May called for a snap election, the pound was the highest performing currency in the world. The announcement for the election was unexpected. May said over and over that she was not looking to make any big moves even though her party made a huge lead in all the polls.
It appears, though, that the government feels there will be a big victory in the election that will strengthen the UKs negotiations in the Brexit movement. According to May, the election has to take place before the European Union takes its own negotiating position. If elections give the Conservative Party more support it just might put the UK in a better position for negotiating the Brexit.
May Looks at Sidelining the Hardline Brexiteers
It appears, though, that the markets are looking at a Conservative landslide from another viewpoint. A suggestion has been made that a win for the party would result in May relying upon Brexit hardliners left. This would lead her to make a more “constructive” Brexit. Still, the pound could weaken as a result.
Polls show the Labour party is several points behind the Conservatives. This indicates that May will have a good chance of getting the majority. The Labour leader confirmed that his party will back any bill put before Parliament pushing for the vote. The UK now officially enters a period of uncertainty. Markets hate uncertainty.
Before May’s announcement, the Pound Sterling was the best performing currency. But following the Easter break, the Pound was enjoying a few moments of market jitters with the currency going up following the building tensions between the US and Russia as well as the US and North Korea.
The Pound Gains in European Markets
The Pound showed earlier that it enjoys when the markets enter the red. European markets are getting the lead from Asia. Their indices were lower at the beginning of the week which suggests the nervousness of most investors.
After the long weekend where most markets were closed, tensions over Syria and North Korea raised new concerns about France’s presidential election. Risk sentiments continue to get weighed. The US Treasury yields have gone down while the yen and gold which are safe havens have gone up sharply.
The Pound’s Focus Will Shift to Retail Sales by Week’s End
By Friday, the focus on UK retail sales will shift as these sales represent a fifth of the UK’s consumption. While retail sales and their contribution to the first quarter numbers will likely be a negative one, they will go a bit beyond the range they were in in the past few years if the print makes it over 3.1 percent m/m.