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The closer the snap election in the UK (8 June) and the FOMC meeting (14 June) get, the harder it is to predict the behaviour of market participants and prices. Election surveys, US and European bond yields, stock index dynamics and an appetite for risk are all having an effect on the dynamics of currency pairs. Everything is changing so quickly that traders are turning a blind eye to weak statistics.
A YouGov projection showed yesterday that the ruling Conservative party could fall 16 seats short of the 326 required for a parliamentary majority. On the other hand, a survey conducted by Kantar shows a widening gap between the two major parties. In the first half of the day, the pound fell against the US dollar by 90 pips. In the second half, it grew by 150 pips. Buyers received some extra impetus from a fall in US bond yields.
Correspondingly, the EUR/USD pair continued its rally. The price first broke out of the 7-day channel at 1.1192 level before going on to break through the trend line at 1.1217 level thanks to a slip in US bond yields.
The release of macro-economic statistics in the US didn’t manage to provide any support for the dollar. The Chicago PMI fell to 55.2, while pending home sales recorded a fall of 1.3%.
Market expectations:
At the time of writing, the Euro is trading at 1.1243 USD. On Wednesday, growth on our pair stalled at around 1,1252 level. Buyers renewed to maximum in Asia to 1.1257. The last 14 hours have shown a sideways trend, with the pair trading within a 22-pip range. I’ve decided not to make a forecast for now, as I want to see what happens when trading opens in London. Asian traders are trying to continue the rally, but this has been unsuccessful so far due to a lack of trading volume.
An ADP employment report is set to be published in the US today, along with an ISM manufacturing report and a jobs report for May. These are important reports in the wake of Friday’s payrolls.
Day’s news (GMT+3):
