What May the pound do?
PM May is due to meet the 1922 Committee, a group of Conservative backbenchers, today and there is widespread speculation that she would give a definite timeline for her resignation. While some are clamouring for an immediate departure, it would require an amendment to existing rules and regulations governing the Conservative Party leadership beforehand.
In addition, press reports have noted that the time taken to choose a new leader could mean that an interim PM would be in charge for US President Trump’s visit from June 3-5. In addition, the results of the European election will not be known until Sunday. The FT suggests June 10 as a viable date.
Meanwhile the pound is little changed in Asia today, trading at 1.2660 versus the US dollar after touching an intraday low of 1.2605 yesterday, the weakest since January 3. The FX pair has so far failed to close below the 78.6% Fibonacci retracement of the January-March rally at 1.2654, though there have been spikes below over the past two days.
GBP/USD Daily Chart
Australia rate cut calls intensify
In a research note released today, Westpac updated its Aussie interest rate outlook and now expects the RBA to deliver three rate cuts by the end of the year. Previously the bank had expected cuts in June and August but has now added another one by November.
The research note had an impact on markets with the Australian dollar pegged lower across the board, with AUD/USD retreating from intraday highs above 0.69 while AUD/JPY edged back toward the lows of the week. The Australia two-year yield fell 2bps to below 1.39%, while interest rate markets are now pricing in an 88% probability of a rate cut in June. The odds for an August cut have risen to just below 50% from about 30% at the start of the week.
AUD/USD Daily Chart
There’s still some UK data
No doubt the main event for the UK will be the PM May meeting but we also have retail sales data for April scheduled. Sales are expected to fall 0.3% m/m following a 1.1% expansion in March. The only other data point of note is US durable goods orders for April. Polls suggest orders fell 2.0% after gaining 2.8% the previous month.
The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/
Have a great weekend.
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A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
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