FX market outlookPosted on Friday, June 9 2017 at 8:42 am GMT+0000
Sterling plunges on political uncertainty after inconclusive UK election result.
Sterling plunged on political uncertainty after an inconclusive result in the UK general elections that took place on Thursday, with no single party having a clear claim to power. The dollar moved higher as it was unfazed by former FBI Director James Comey’s testimony yesterday.
The British pound lost over 2% against the greenback, touching near a two-month low of $1.2634. The euro surged against sterling to a high of 88.58 pence. Exit polls showed the likelihood of a hung parliament since Prime Minister Theresa May’s Conservative party is expected to win without a majority, just days ahead of the Brexit negotiations.
In other currencies, the euro tested the key $1.1200 level and last traded below it at $1.1185. The yen gave up early session gains as the dollar rose back up to 110.46 yen. The aussie traded in a range in Asia around $0.7535, with little reaction to inflation data out of China, its major trading partner.
Chinese data raised concerns over the broader health of the economy as producer prices tumbled, pointing to an easing of broader price pressures. PPI slowed for a third consecutive month with a reading of +5.5% year-on-year in May versus +5.7 % expected. CPI in May was in line with forecasts at +1.5% year-on-year, accelerating faster than April’s +1.2%.
The dollar and US equities saw little impact from Comey’s Senate testimony, which is perceived as not threatening President Donald Trump’s administration for now.
In commodity markets, gold eased lower in Asian trading to $1,271.16 an ounce from a session high of $1281.48, but remained close to yesterday’s lows. Oil prices remained weak, with WTI crude near one-month lows around $45.20 a barrel.