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The votes are in and pound bears came out! With Theresa May’s Conservative Party juuust missing majority, forex traders got busy shorting the pound.

  • U.K. general elections results in hung Parliament
  • AU home loans down by 1.9% vs. -0.9% expected, -0.9% in March
  • China’s CPI (y/y) climbs by 1.5% as expected vs. 1.2% growth in April
  • China’s PPI (y/y) up by 5.5% vs. 5.7% expected, 6.4% previous
  • Japan’s tertiary industry activity up by 1.2% vs. 0.5% expected, -0.3% previous

Major Events/Reports

U.K. elections result in hung Parliament

With 645 out of 650 constituencies declared, the U.K. is now officially dealing with a hung Parliament.

Theresa May’s Conservative Party has gotten 314 seats after losing 12 seats so far, while Jeremy Corbin’s Labour Party picked up 31 seats to 261. Nicola Sturgeon’s Scottish National Party is in third place with 35 seats while Tim Farron’s Liberal Democrats have 12.

The snap election was a huge gamble for Theresa May, who wanted to bolster her party’s numbers (previously at 330 seats) to get stronger support for her Brexit plans with the EU.

But the gamble was an epic fail and now the U.K. is dealing with a hung Parliament. This means that, unless the Tories team up with other parties or the MPs call for another elections, May and her team will have to bargain/concede/soften their stance on Brexit.

Not surprisingly, the uncertainty as well as the prospect of a “messy” Brexit weighed on the British pound across the board.

China’s CPI and PPI reports

Consumer prices in the world’s second largest economy edged higher in May, matching market estimates by growing by 1.5% after inching 1.2% higher in April.

Producer prices, on the other hand, only rose by 5.5% from a month earlier in May. Though it also lines with market expectations, it’s slower than April’s 6.4% growth.

The prospects aren’t looking too good for both consumer and producer prices. Tighter monetary policies and stricter restrictions on home-buying are expected to pinch disposable income and discourage home-related spending.

Meanwhile, regulatory efforts to contain financial risks could lead to less property and infrastructure investment, which, together with lower commodity prices, would then lead to lower demand for raw materials.

Overall risk appetite

The lack of a “smoking gun” from Comey’s testimony during the U.S. session meant that Trump can now focus more on fulfilling his tax and infrastructure plans. China’s better-than-expected CPI report also kept the investors’ spirits up during the Asian session.

  • Nikkei is up by 0.71% to 20,050.00;
  • Hang Seng is down by 0.16% to 26,021.00;
  • Shanghai index is up by 0.07% to 3,152.45, and
  • Australia’s A SX 200 is up by 0.20% to 5,687.70

Major Market Mover(s):

GBP

It was a bloodbath for the pound during the Asian session, as the prospect of a hung parliament, well, hung over the markets.

GBP/USD is down by a whopping 196 pips (-1.51%) to 1.2752, GBP/JPY is down by 177 pips (-1.24%) to 140.65, EUR/GBP is up by 119 pips (-1.37%) to .8783, and GBP/CHF is down by 171 pips (-1.37%) to 1.2351.

USD

The Greenback edged higher against its major counterparts as Asian session traders caught up to the rally from the previous session.

EUR/USD slipped by 16 pips (-0.14%) to 1.1201, USD/JPY popped up by 32 pips (+0.29%) to 110.31, and USD/CHF inched 14 pips higher (+0.15%) to .9686.

Watch Out For:

  • 6:00 am GMT: German trade balance (20.3B EUR expected, 19.6B previous)
  • 6:45 am GMT: French government (-29.6B EUR previous)
  • 6:45 am GMT: French industrial production (0.3% expected, 2.0% previous)
  • 8:00 am GMT: Italian quarterly unemployment rate (11.6% expected vs. 11.9% previous)
  • 8:30 am GMT: U.K. manufacturing production (0.8% expected, -0.6% previous)
  • 8:30 am GMT: U.K. goods trade balance (-12.0B GBP expected, -13.4B GBP previous)
  • 8:30 am GMT: U.K. construction output (0.5% expected, -0.7% previous)
  • 8:30 am GMT: U.K. consumer inflation expectations
  • 8:30 am GMT: U.K. industrial production (0.7% expected, -0.5% previous)
  • 9:00 am GMT: Prime Minister Theresa May to speak regarding elections