Will GBP gain if Tory/DUP deal is struck on Tuesday?

The pound got off to a good start to the week, gaining against all of its most traded rivals.

GBP/EUR began the week by climbing from €1.1357 to €1.1395, GBP/USD jumped from $1.2711 to $1.2751, GBP/AUD rallied to AU$1.6848 from A$1.6763 and GBP/NZD pushed from a low of NZ$1.7451 to a high of NZ$1.7525.

Is currency volatility likely this week? Keep scrolling to find out…

What’s been happening?

Over the weekend it was reported that the Conservatives are inching closer to forming a deal with the Democratic Unionist Party (DUP).

According to DUP sources a deal could be finalised by Tuesday and the Guardian stated; ‘the crux of the Tory-DUP deal in London rests mainly on an economic package for Northern Ireland including increased capital spending on health and education, the granting of special lower corporation tax status for the region and the possible abolition in the province of air passenger duty tax.’

In other news, Brexit Secretary David Davis announced that he was ‘pretty sure’ that he would be able to secure the UK a free trade deal with the EU during Brexit negotiations.

However, Davis did add that he couldn’t be certain of achieving that goal and that if the UK was presented with a so-called ‘punishment deal’ by EU officials the nation should be ready to walk away from it.

While speaking on BBC One's Andrew Marr Show, Davis also said of PM Theresa May; ‘Let me be absolutely plain about this, number one, I happen to think we have got a very good Prime Minister. I know she is coming under a lot of pressure at the moment, but I have seen her in action. I think she is very good. She makes good decisions. She's bold. She takes her time. Point number two is, I want a stable backdrop to this Brexit negotiation.’

What's coming up?

With high-profile UK economic reports in fairly short supply, any progress in the Conservative/DUP deal is likely to inspire GBP exchange rate movement in the first half of the week.

The British stats set for release include today’s BBA loans for house purchase figure, which is expected to reveal a decrease in lending in May.

Meanwhile, the Euro could be moved by German IFO business climate, current assessment and expectations gauges. While the current assessment measure is forecast to remain unchanged, the other two benchmarks of business sentiment are believed to have fallen – results which could put the euro under a little pressure.

The US dollar may also be left feeling the heat later in the day if domestic durable goods orders data confirms a month-on-month decline of -0.6% in May. This would follow a -0.8% drop in April.

If you have an interest in the New Zealand dollar you’ll also want to be watching the upcoming batch of trade figures for New Zealand, which are predicted to show a slight narrowing in the nation’s trade surplus.

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.