Sterling survives poll shock


Army lore has it that for the Corps of Royal Engineers the Latin motto "Ubique" means "everywhere" while, for the Royal Artillery, it means "all over the place". There was a distinct sense of the latter in the FX market on Wednesday.

Having taken a hit during the Far East session sterling rebounded fairly strongly during the London morning. Investors decided that the YouGov opinion poll, which pointed to a hung parliament after next Thursday's election, was an outlier and that the Conservative party should still win a working majority in the Commons. There were no UK economic data to trouble the pound: personal loans and mortgage approvals were not all they might have been but consumer credit beat forecast. 

The pound did, however, take a pace back during the televised election debate on Wednesday evening. The net result was losses of two fifths of a Swiss cent and a quarter of a euro cent but it was firmer on the day against just about everything else. The pound went up by half a US cent and two thirds of a Japanese yen. Its average gain was 0.3%.

Commonwealth dollars to the rear

The Australian, Canadian and New Zealand dollars were the worst performers, as a result of lower commodity prices and weak data from China. The winner of the wooden spoon was the Aussie, which is down by two cents against the pound.

A three-point drop for Australia's Performance of Manufacturing (purchasing managers') index did no obvious harm to the Aussie and a 1.0% monthly increase in retail sales was seen as positive. The reaction to China's second manufacturing PMI, the Caixin, was less benign. It was down by a point at 49.6, moving from the growth zone to the sub-50 contraction zone and investors were worried how that might affect demand for Australian exports.

In penultimate spot the Loonie received no help whatsoever from news that the Canadian economy expanded at an annual rate of 3.7% in the first quarter, equivalent to 0.9% quarter-on-quarter growth. Even though that put Canada in pole position among G7 countries (Britain came last) it was not enough to satisfy investors who had been expecting an even stronger number. The Loonie is down by a cent and a quarter.

PMIs and jobs

The traditional first-of-the-month raft of manufacturing PMIs dominates today's agenda. Tomorrow's focus will be on the US employment report, which is forecast to show an increase of around 180k in nonfarm payrolls.

Data already out put Q1 growth in Switzerland at 0.3% and British house prices 2.1% higher on the year after a -0.2% decline in May. The UK manufacturing PMI is expected to come in at 56.5, half a point behind the Euroland reading.

US payrolls have gone up by an average of 185k a month this year, a little more than 2016's 216k average. A number in that area is likely to keep the Fed on track for a June rate hike.