UK election results imminent, Comey testimony a non-event so far
James Chen, CMT June 8, 2017 3:09 PM
Meanwhile, on the other side of the Atlantic, US markets were preoccupied with the beginning of former FBI Director James Comey’s testimony in front of the US Senate about his past interactions with President Trump. In this first session of testimony, Comey came out strongly at the very beginning, essentially characterizing President Trump as a suspected liar. But through the course of the hearing, the former FBI chief did not reveal any major new information that would significantly intensify the case against Trump, other than what had already been widely publicized.
Markets initially took this lack of new or irrefutable evidence against Trump as yet another sign to rally. During the course of Comey’s morning testimony, US stocks rose off a flat open, and the Dow was up around 80 points at one time to hit a new record high before paring gains later in the day. The US dollar, also, remained strong and well-supported throughout the day, as safe haven assets like gold and the Japanese yen were pressured.
Amid the relatively uneventful Comey testimony along with high anticipation of exit poll results from the UK due out in the evening, GBP/USD remained relatively range-bound on Thursday, as might be expected. Going forward, into late Thursday and Friday morning, the results of the UK election will be the primary driver of GBP/USD movement. As noted on Wednesday’s analysis, potential pound reactions to the election outcome will likely be as follows:
- If UK Prime Minister Theresa May’s Conservative Party wins by a large margin, the pound should see a strong boost as Brexit-driven conflict within the government would likely be ameliorated.
- If Conservatives win by a small margin, the impact could be neutral to somewhat negative, as the status quo will not have been materially altered but disappointment that May will have failed to secure a strong mandate could pressure sterling.
- If a hung Parliament results, which should lead to a multi-party coalition government, the sheer uncertainty produced by this outcome could weigh very heavily on the pound.
- In the unlikely event that Labour is victorious, the immediate impact on the pound should also be negative due to the many uncertainties that would arise surrounding Brexit negotiations going forward.
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