Currency Note

First leadership ballot to take place

By Erin Harding June 13th, 2019

Ballot

The pound is choppy this morning, with the first ballot in the Conservative leadership contest set to begin within half an hour. We have already seen a weakening in the sterling yesterday, after the Commons rejected a Labour motion against no-deal. However, no-one can predict what will happen – we could see significant movement downwards, but it could also be the case that the markets are expecting the result.

We’re in a time of a lot of unpredictability, with a number of events over the coming weeks that could have a significant impact on the markets. Don’t leave your business open to chance. Lock in your exchange rate with a forward contract today by calling your Business Trader on 020 7898 0500.

GBP: Pound weakens after Commons reject Labour motion

The pound has weakened after the Commons rejected the chance to pass legislation to block a no-deal Brexit. The Labour Party, along with Tory rebels, put the motion to Parliament. However, this was rejected by 309 votes to 298. Opponents of no-deal are worried that the new Prime Minister could force a no-deal Brexit through by suspending Parliament.

The first ballot vote for the Conservative leadership will take place today between 10am and 12pm, with announcements likely to be made around 1pm. Any candidates with less than 5% of the vote will be eliminated. If all candidates have more than 5%, then the MP with the least amount of votes will be taken out of the race.

EUR: Policymakers discuss Italian debt row

Finance ministers across the eurozone are to discuss Italy’s budget crisis and the potential use of an Excessive Debt Procedure if Rome fails to work on its budget deficit. Penalties could include a fine of as much as $2 billion.

Brexit continues – unsurprisingly – to be a worry for the markets, and all eyes will be on the UK today as the first ballot takes place for its leadership race.

German inflation was confirmed to be down year-on-year, from 2% to 1.4%. It had little impact on the markets, as the expectations had been priced in. There are no further economic releases of note today or tomorrow, so focus really will be on the political element.

USD: Dollar mixed after core inflation figures

The dollar has weakened against the euro this morning amid uncertainty over whether the US and China will be able to reach a deal during the G-20 summit in Japan at the end of the month. However, the greenback is benefitting from the pound’s weakness.

Figures released yesterday showed that US core headline and inflation data has missed forecast, supporting the Federal Reserve’s case to cut interest rates.

Tomorrow, retail sales and consumer sentiment figures will be released. Retail figures are expected to rise 0.6% after falling by 0.2% in April.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.