020 7898 0500Despite the lack of economic data, yesterday saw sterling resume its downward trend as the market focus remains on the political uncertainty surrounding current UK Prime Minister Theresa May and the Conservatives. The suggestion that the Queen’s Speech could be rescheduled has done nothing to stifle the idea that the government is in turmoil.
After losing their majority in last week’s election, the Tories are currently in talks with the DUP about forming a coalition. Many of the beliefs of those in the DUP are at odds with the Conservatives’ and it will be interesting to see what compromises are reached. It looks likely the arrangement will be a precarious one and, according to several bookmakers, the chances of another general election in 2017 are currently around 30%.
Moody’s has also warned that the UK’s credit rating could be downgraded after last week’s hung parliament. While political events will likely dominate the coming days, later the headline inflation numbers will be released. The consumer price index (which is the Bank of England’s preferred measure of inflation), is expected to remain at 2.7%. If it falls short of this, sterling could weaken further.
