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No data? No problem! The pound was the star of today’s morning London session, thanks to Theresa May’s surprise call for early elections. Meanwhile, the Loonie tracked the slide in oil prices and ended up as the worst-performing currency of the session.

  • No economic reports were released during the session
  • Theresa May calls for an early election

Major Events/Reports:

Theresa May calls for early elections – Rumors began to circulate earlier that U.K. Prime Minister Theresa May may be calling for an early election.

And as it turns out, those rumors were true, since May later announced that she’s calling two-thirds of MPs to support her call for “a general election, to be held on 8 June.”

May explained her surprise decision to call for early elections by first berating her opposition. According to May:

“In recent weeks Labour has threatened to vote against the final agreement we reach with the European Union. The Liberal Democrats have said they want to grind the business of government to a standstill.”

“The Scottish National Party say they will vote against the legislation that formally repeals Britain’s membership of the European Union. And unelected members of the House of Lords have vowed to fight us every step of the way.”

May explains that the opposition parties do this “because the government’s majority is so small.” She then added that if this “political game-playing” continues, then it will “[weaken] the government’s negotiating position in Europe.”

As such, an early election is needed because “Every vote for the Conservatives will make it harder for opposition politicians who want to stop [Theresa May] from getting the job done. Every vote for the Conservatives will make [May] stronger when [she] negotiate for Britain with the prime ministers, presidents and chancellors of the European Union.”

In short, the opposition parties are giving Theresa May a hard time, weakening May’s ability to effectively negotiate a proper Brexit. May therefore wants to strengthen her position by calling for an early election and hoping that the people vote for more Conservative Party Members.

MPs would be voting on whether or not to back early elections tomorrow. And chances are good that May will get her wish because word going around is that the Labour Party will support the vote.

As to whether or not it makes sense for May to call for a vote, well, the latest poll results are giving the Conservatives a rather large lead. Yougov’s latest poll conducted between April 12 to 13, for example, gives the Conservatives a rather comfortable 21-point lead over Labour. But then again, the polls have become (in)famous recently because many polls got the Brexit referendum wrong, so yeah.

Source: Yougov

Le Pen loses lead – In opinionway’s latest daily poll, the anti-EU Le Pen finally lost her lead in the first round of the French presidential elections to Macron, with 23% for Macron and 22% for Le Pen.

It’s kind of a mixed blessing for those hoping that the status quo would be maintained, though, since voting intentions for Fillon slid from 21% to 20% while the anti-EU Melenchon advanced from 18% to 19%.

Commodities crushed – Commodities were broadly in retreat during the morning London session.

Precious metals got whupped, despite the risk-off vibes.

  • Gold was up down 0.34% to $1,287.50 per troy ounce
  • Silver was down by 0.62% to $18.400 per troy ounce

Base metals, meanwhile, got swamped by sellers.

  • Copper was down by 1.81%% to $2.549 per pound
  • Nickel was down by 1.65% to $9,547.50 per dry metric ton

As for oil benchmarks, they were sinking.

  • U.S. crude oil was down by 0.91% to $52.17 per barrel
  • Brent crude oil was down by 1.05% to $54.78 per barrel

The U.S. dollar index was down by 0.32% to 99.88 when the session ended, so we can’t really point to that.

However, market analysts say that the slump in oil prices was due to worries that U.S. oil output is expected to jump in May.

The slide in base metals, meanwhile, was being blamed by market analysts on geopolitical risks.

As for the dip in precious metals, gold in particular, that was being attributed mainly to profit-taking, since gold is apparently approaching key technical levels.

Risk aversion domination – European market players finally returned, but the holidays didn’t seem to improve optimism by a lot, since European equity indices got pushed into the red.

  • The pan-European FTSEurofirst 300 was down by 0.90% to 1,483.39
  • Germany’s DAX was already down by 0.66 to 12,029.50
  • The blue-chip Euro Stoxx 50 was down by 0.94% to 3,416.00

Even U.S. equity futures could got burdened by all that pessimism.

  • S&P 500 futures were down by 0.37% to 2,336.25
  • Nasdaq futures were down by 0.30% to 5,378.88

Bonds were also in high demand, causing bond yields to plunge.

  • French 10-year bond yield down by 2.39% to 0.897%
  • German 10-year bond yield down by 9.28% to 0.176%
  • U.K. 10-year bond yield down by 3.26% to 1.010%
  • U.S. 10-year bond yield down by 1.52% to 2.218%

Market analysts blamed the overall risk aversion to jitters over tomorrow’s vote to support early elections in the U.K. and the upcoming first round of the French elections. Although the commodities rout also apparently poisoned sentiment, since mining and energy shares were the main losers.

Major Market Mover(s):

GBP – The pound slumped hard when Theresa May announced that she has, er, an announcement to make and rumors began to make the rounds that May will be calling for early elections. And when May did call for early elections later, the pound jumped higher.

This was likely a “sell the rumor, buy the fact” scenario. However, it’s also probable that the pound got actual buyers, since May’s stated purpose for calling for early elections was to strengthen the Conservative Party’s control, strengthening the government’s ability to negotiate a Brexit deal in the process.

This move is therefore meant to ease uncertainty. Although it will likely create uncertainty in the near-term, since the polls aren’t exactly 100% trustworthy. But at least some uncertainty will disappear when the MPs vote to back an early election tomorrow.

GBP/USD dropped 72 pips (-0.58%) to 1.2512 earlier, but closed the session higher by 85 pips (+0.68%) to 1.2671, GBP/AUD dropped 66 pips (-0.40%) to 1.6585 earlier, but closed the session higher by 131 pips (+0.79%) to 1.6783, GBP/CAD dropped 70 pips (-0.42%) to 1.6698 earlier, but closed the session higher by 148 pips (+0.88%) to 1.6916

CAD – The Loonie was the worst-performing currency of the session. There were no direct catalysts, so the Loonie was likely being dragged down by the slide in oil prices.

USD/CAD was up by 30 pips (+0.22%) to 1.3351, EUR/CAD was up by 71 pips (+0.50%) to 1.4258, NZD/CAD was up by 54 pips (+0.58%) to 0.9394

Watch Out For:

  • 12:30 pm GMT: U.S. building permits (1.25M expected, 1.22M previous) and housing starts (1.25M expected, 1.29M previous)
  • 12:30 pm GMT: Canadian foreign securities purchases ($5.21B expected, $6.20B previous)
  • 1:15 pm GMT: U.S. industrial production (0.5% expected, 0.0% previous) and capacity utilization rate (76,3% expected, 75.4% previous)
  • 2:30 pm GMT: CB’s Australian leading index (0.4% previous)
  • 4:45 pm GMT: BOC Senior Deputy Governor Carolyn Wilkins will speak
  • Dairy auction currently underway (+1.6% previous); auction usually ends at around 2:00 pm GMT