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Tracking GBP’s Post-Election Trading Spike CLS and Thomson Reuters (TR) have released data charting the spike in GBP trading following the UK’s recent general election.The exit poll at 22:00 produced a surprise outcome with the Conservative party expected to win just 314 seats, far less The exit poll at 22:00 produced a surprise outcome with the Conservative party expected to win just 314 seats, far less than previous polls and 12 seats short of an overall majority. The data from CLS shows that this resulted in an elevated trading activity in GBP/USD at 22:00. As results were being announced during the night, the unexpected exit poll was becoming more credible and GBP/USD volumes remained much higher than the 2016 average.
Survey: Geopolitics the Biggest Challenge for PLN Polish FX executives say that geopolitics is the biggest issue facing its country and currency this year, according to the results of a Bloomberg FX survey issued today. In the survey 56% of Warsaw FX professionals said that the single biggest challenge facing corporations in the country will be navigating geopolitical challenges, while one-quarter say it will be hedging against market volatility. According 56% of those who responded to the survey, the most significant issue affecting the zloty in 2017 will be political developments between Poland and Europe. Other survey respondents thought that the zloty could be most affected by geopolitics or moves by central banks in the US and Europe.
Uncertainty Rules as Markets Await UK Results FX markets have settled with sterling some 1.5% lower after the shock exit poll indicated a hung parliament and analysts are saying that further losses could be possible. “It’s not looking good for Theresa May, who appears to have lost the Conservative’s majority in Parliament,” writes Kathleen Brooks, director at City Index. She adds, however, that in 2015 the exit poll also suggested that the Tories wouldn’t win an overall majority, but they won with a slim majority, “so there is a chance that Theresa May could still hang onto Number 10”.
Sterling Sharply Lower on Exit Polls Sterling has dropped sharply in early Asian trading as exit polls from the UK election indicates the ruling Conservative government will win the most seats but will fall short of a majority. An exit poll for BBC News, ITN News and Sky News indicates the Conservatives wining 314 seats, Labour 266, Scottish National Party 34, Liberal Democrats 14 and local parties (including the Greens) winning 22. Cable has fallen from 1.2950 to 1.2710, EUR/GBP rose strongly to 0.8820 from 0.8657 and GBP/JPY fell from 142.50 to 139.75. Cable has bounced to 1.2760 and EUR/GBP is back below 0.8800,
Election 2017: What could happen and what to consider The outcome of the UK General Election has become less certain as the campaign has progressed, posing questions around the impact of an unexpected result. Some investors are speculating about how this will affect the pound and, of course, Brexit negotiations. Michael Gowland, global head of treasury at Earthport FX, provides an outline of some of the possible scenarios. Scenario 1: Conservative win The market has largely priced in this outcome and therefore, we expect this result to have a neutral to slightly negative impact on sterling going forward. The Conservative pledge of a “balanced budget by 2025”, which roughly translates as tighter fiscal policy, may have a medium-term impact on sterling, although the current upward trend we see on technical charts should not be discounted – and at this stage, we would refrain from being overly negative.
LMAX Exchange Challenges Conventional Wisdom on TCA A new white paper released today by LMAX Exchange seeks to offer more in-depth analysis of the cost of trading in FX markets and calls for the creation of “robust, commonly-agreed” transaction cost analysis (TCA) metrics that compare and contrast the differences between executing on firm and last look liquidity. The paper, TCA and Fair Execution: The Metrics that the FX Industry Must Use, proposes a blueprint for clients to better discern and compare the costs of trading across firm and last look venues and argues that existing TCA metrics fail to capture the nuances and value of firm liquidity.
French Election: Spot Market Calmer Second Time Round Data from CLS shows that the first round of the French presidential election caused a much stronger reaction in the spot FX market than the second round. The data shows that there was a significant spike in volumes following the first round of voting. Ahead of the vote, polls were showing a statistical tie for the top four candidates, and therefore the result was much more uncertain. Before polling was suspended by law on Friday, 21 April 2017, Bloomberg’s composite of French polls showed Emmanuel Macron in the lead with 24.5 % and Marine Le Pen in second place with 22.5% of the vote
Survey: Oil to Drive Ruble Price in 2017 The biggest issue facing the Russian ruble in 2017 is the price of oil, according to a Bloomberg survey of FX executives released today. Of those polled, the majority (or 51%), say oil prices will have the biggest effect on the currency, with 83% of the executives saying that they feel that the ruble will be more correlated to oil than emerging markets currencies this year. Of less concern in relation to the ruble were Russian Central Bank policies and geopolitics, which only 22% said they were concerned about, and just 5% of respondents said that they are concerned about US interest rate hikes.
Exploring Correlations Between the Yen and Nikkei SGX has released an article looking at whether the long-standing assumption that the Japanese yen is inversely correlated with Japanese equity indices, and what this means against the current geopolitical outlook. Conventional wisdom maintains that that a weakening yen leads to stock gains, with benchmarks such as the Nikkei 225 and the Topix Index strengthening as a result. According to the data presented by SGX, although the correlation between the Nikkei 225 Index and the Japanese yen fluctuates daily, historical evidence over the past four years shows that the inverse correlation theory holds true most of the time.
Sterling Extends Rally on Election Call Cable has extended its bounce from the earlier dip to 1.2515, hitting 1.2665 following UK Prime Minister Teresa May’s surprise general election call amidst polls showing her Conservative Party has a strong lead in the polls. The rally comes in spite of fears in some quarters that the snap poll could turn into a quasi second referendum on UK membership of the European Union with the Liberal Democrats likely to be a magnet for disaffected voters wanting to remain in Europe.