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Corbyn favourite as next PM?

Daily Currency Update

GBP - British PoundGood news for May and Corbyn yesterday as the Chairman of the European Union Donald Tusk is very likely to offer a flexible extension in regards to the UK leaving the EU. It is likely that this extension will last up to one year where the possibility of leaving sooner, if a withdrawal agreement is offered and agreed beforehand. This is expected to be presented to May at the EU summit on Wednesday April 10th. Assuming May accepts this extension, Britain would have to hold elections to the European Parliament in May. Most importantly, a Reuters poll found that if the Brexit gridlock is resolved and Britain leave the EU with a deal, Sterling may increase as high as 3%. However, if negotiations breakdown, it is expected that Sterling could crumble as much as 5%.Since May has reached out to Corbyn, in order to form a cross party alternative deal, the Labour leader’s odds on becoming the new PM have been shortened. Corbyn is now favourite to take over May as PM, alongside Boris Johnson and Michael Gove. Contrary to previous trends, a potential Labour government has not caused a negative market response. In fact, the work of May has improved investor confidence that the UK will not leave the EU without a deal which has strengthened Sterling.

Key Movers

President Trump leadership has once again seen the U.S. economy perform very well economically. US equities have are certainly on the road to recovery since the December sell-off. In fact, the S&P 500 index is just over 2% away from the highs in mid-September. Investors assume that policy is being prepared for Trump’s 2020 re-election bid.Further positive news from the US came out as optimistic trade comments from Chinese leaders exciting a fairly dormant Asian trading session. President Xi, who pointed to substantial progress in trade talks with Washington. Chinese Vice President Liu claimed that ‘a new consensus has been reached’. If these comments are true and the US-China trade war is in the process of being resolved, then expect a hike in U.S Dollar strength. Investors look ahead today at US non-farm payroll data, industrial data from Germany and Canadian labour market data.

Expected Ranges

  • GBP/USD: 1.3060 - 1.3140 ▼
  • GBP/EUR: 1.1640 - 1.1720 ▼
  • GBP/CAD: 1.7460 - 1.7535 ▼
  • GBP/NZD: 1.9395 - 1.9485 ▲