Sterling started the day by falling back against the US dollar, dropping below the psychological US$1.30 level, in response to the Conservative’s ‘dementia tax’ policy that did not go down well with voters. The opinion polls showed the Tories have the narrowest advantage they have held all year, suggesting their manifesto has not struck the right chord with the electorate.
Theresa May promptly responded by performing a dramatic u-turn on the proposed changes to social care funding in England. The pound then clambered back against the dollar, as the ongoing saga regarding President Trump continues to weigh heavy on the greenback.
Looking to the day ahead, we have the Bank of England inflation report hearing before Parliament’s Treasury Select Committee. We don’t expect to see any major divergence from the quarterly inflation report at the beginning of the month. In addition, the public sector borrowing figures are due to be released.