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The pound took another hit during the Asian session as a new election poll hinted that Theresa May’s Conservative Party may get a few seats short of a majority in the Parliament.

  • RBNZ: Financial system risks have been “reduced” on lower house inflation
  • U.K. BRC shop price index (y/y) down by 0.4% vs. 0.5% decline in April
  • Japan’s preliminary industrial production up by 4.0% vs. 4.2% expected, -1.9% previous
  • China’s manufacturing PMI remains at 51.2 in May vs. 51.0 expected
  • China’s non-manufacturing PMI rises from 54.0 to 54.5
  • NZ ANZ business confidence pops up from 11.0 to 14.9 in May
  • AU private sector credit (y/y) remains at 0.4% as expected
  • Japan’s housing starts (y/y) up by 1.9% vs. -1.4% expected, 0.2% previous

Major Events/Reports:

New election poll weighs on GBP

Polling agency YouGov delivered another hit to the pound after its latest release hinted that Theresa May and her Conservative Party are at risk of falling short of majority in parliament on June 8.

According to The Times, the new constituency-by-constituency modelling by YouGov showed it might lose 20 of the 330 seats it holds and the opposition Labour Party could gain nearly 30 seats.

This could leave the Conservatives 16 seats short of the overall majority of 326 needed to govern without the support of other parties. The forecast is much different from calls that May’s party will step up their numbers after the elections.

Even though the poll used a new methodology; has wide margins of error, and is merely a forecast, it was enough to weigh on the pound, at least for an hour or so. Sterling soon regained at least half of its losses before the end of the session.

China’s PMI releases

Official PMIs from China showed the manufacturing and services sectors expanding faster than expected in May.

National Bureau of Statistic’s official Purchasing Managers’ Index (PMI) came in at 51.2 in May, higher than the expected 51.0 reading, thanks to optimism over increased construction and infrastructure investment.

Meanwhile, service sector growth accelerated from 54.0 to 54.5 as rising demand for commercial activities like retail and railway transportation buoyed sentiment.

Overall, the numbers look good for the government’s efforts to curb financial risks without sacrificing economic growth.

Major Market Mover(s):

GBP

Thanks to a new poll showing the weakening lead of May’s Conservative Party, the pound was dragged lower across the board before recovering some of its losses.

GBP/USD fell to a session low of 1.2791 before ending at 1.2822, GBP/JPY dropped to 141.81 before popping back up to 142.43, and EUR/GBP jumped to .8741 before falling back down to .8717.

AUD

The Aussie, which usually tracks sentiment for China’s economy, dropped across the board despite favorable PMI releases from the world’s second largest economy.

One possible reason is that market players are waiting for the unofficial PMI releases for comparison.

Another is that iron ore has fallen by as much as 4% during the Asian session amidst lower steel prices and a supply glut. The most-traded iron ore contract on the Dalian Commodity Exchange fell as low as 433.50 yuan ($63) a tonne, its lowest since November 2016. It was down 3.2 percent at 437 yuan by midday.

AUD/USD slipped from a session high of .7476 to trade at .7451 while AUD/JPY fell from 82.95 to 82.77. Heck, GBP/AUD even shot up from 1.7144 to 1.7207!

Watch Out For:

  • 6:00 am GMT: Switzerland’s UBS consumption indicator
  • 6:00 am GMT: German retail sales (0.4% expected, 0.1% previous)
  • 6:45 am GMT: French preliminary CPI (0.2% expected, 0.1% previous)
  • 7:55 am GMT: German unemployment change (-14K expected, -15K previous)
  • 8:00 am GMT: Italy’s unemployment rate (11.6% expected, 11.7% previous)
  • 8:30 am GMT: U.K. net individual lending (4.5B GBP expected, 4.7GBP previous)
  • 8:30 am GMT: U.K. mortgage approvals (66K expected, 67K previous)
  • 9:00 am GMT: Euro Zone CPI flash estimate (y/y) (1.5% expected, 1.9% previous)
  • 9:00 am GMT: Euro Zone core CPI flash estimate (y/y) (1.0% expected, 1.2% previous)
  • 9:00 am GMT: Italy’s preliminary CPI (-0.2% expected, 0.4% previous)
  • 9:00 am GMT: Euro Zone unemployment rate (9.4% expected, 9.5% previous)