Tory/DUP deal struck, why didn’t GBP climb?

The latest UK political developments failed to boost GBP exchange rates, with the pound generally easing lower against most of its rivals.

GBP/EUR dipped from €1.1396 to €1.1356, GBP/USD fluctuated between $1.2707 and $1.2757, GBP/AUD slid from AU$1.6836 to AU$1.6720 and GBP/NZD weakened from NZ$1.7536 to NZ$1.7400.

What can we expect from today? Keep scrolling to find out…

What’s been happening?

The Conservatives finally came to an accord with the Democratic Unionist Party (DUP) yesterday, slightly earlier than expected.

PM Theresa May said the deal would enable the Tories and the DUP to; ‘work together in the interests of the whole United Kingdom, give us the certainty we require as we embark on our departure from the European Union, and help us build a stronger and fairer society at home.’

Although the deal removes one level of political uncertainty, it failed to give the pound much of a lift. Many view the Prime Minister as standing on precarious ground and some have suggested she could yet face a challenge to her leadership from within her own party in light of her disappointing performance in the recent general election.

The fact that Theresa May's proposal for EU nationals living in the UK came under fire from EU officials didn't help the situation and Sterling spent Monday struggling to gain ground.

In other news, demand for the US dollar dipped as domestic durable goods orders data came in much lower than forecast. Odds of a third Federal Reserve rate hike taking place in 2017 also remained under 50%, boosting risk appetite and lending support to AUD, CAD and NZD.

The New Zealand dollar's gains were limited however as New Zealand's trade surplus narrowed by far more than expected.

What's coming up?

Later today Bank of England (BoE) Governor Mark Carney will be delivering his financial stability review. Last week the central bank chief asserted that it was too soon to consider raising interest rates. If he expresses more caution today the pound could be pressured lower.

The only other news of note comes from the US, with the nation due to publish its consumer confidence report. The sentiment gauge is expected to dip from 117.9 to 116.

Federal Reserve Chairwoman Janet Yellen will also be delivering a talk on global economic issues in London. USD volatility could ensue if Yellen offers up any hints about the Fed’s plans for future interest rate adjustments.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.