Win some, lose some

Over the weekend, the Conservative party won a landslide victory in the former Labour stronghold of Hartlepool, gaining 293 seats while Labour lost 267 seats. It’s an astonishing outcome for Boris Johnson’s administration which proves that—despite some very serious missteps over their early pandemic response, gaffs over flat renovations and migraine-inducing Brexit issues—the support for this new centre-left politics is proving popular. The PM is expected to capitalise on this win by driving his ‘levelling up’ agenda following the Queens Speech on Tuesday.  

While Johnson has cause for celebration in England, Scotland has voted to keep Nicola Sturgeon as their First Minister, which is a proxy vote for Scottish Independence. That said, research by the Financial Times has found popular support for a second plebiscite falling since the turn of the year, partly because of the successful vaccination efforts in the UK compared to the EU’s blundering progress. The real question seems to be whether Johnson’s levelling up agenda is substantive enough to make a difference in fellow commonwealth countries like Scotland and Wales. It certainly helps that progress on the vaccine effort has allowed the government to go forward with plans to relax social distancing further on May 17th, no doubt providing a light at the end of the tunnel for small business throughout the UK.

Bottom line: Boris Johnson is riding high on vaccine success and rightly looking to push forward his fiscal policy agenda while he enjoys the popular support. It helps that his policy stance is much in vogue (higher tax, higher spending policies) amongst western economies right now, but much of the long-term success of these will be determined by good allocation of capital.  For a head of state known for bluff and bluster, it remains to be seen whether prudent investment allocation is within his wheelhouse. The covid era has changed the conversation about the nature of work, which should in turn evolve the decisions about fruitful infrastructure investment. We shall see if that is reflected in the PM’s agenda on Tuesday or whether he is more talk than walk.

The week ahead


Prime Minister Boris Johnson looks set to announce that restrictions will continue to be eased from the 17th May. Foreign holidays will also be allowed, with those countries on the green list exempt from any quarantine measures on return to the UK. The gradual unlocking of the economy is expected to lead to accelerated growth according to the Bank of England, who are expecting the UK economy to grow 7.25% in 2021. Job conditions also look set to improve, with the unemployment rate now forecast to peak at 5.5%. This growing optimism has boosted Cable this morning which has started the week strong, trading above $1.40.

  • Bank of England Governor Andrew Bailey is due to speak throughout the week most notably on Tuesday and Wednesday.
  • Preliminary GDP for Q1 2021 is forecast at -1.6% vs 1.3% in Q4 of 2020. This drop off is likely due to the UK’s national lockdown.
  • GDP m/m is set to read 1.5% vs 0.4% last month indicating the re-opening of the economy is beginning to positively impact growth.
  • Monetary Policy Committee member Jon Cunliffe is due to speak on Thursday.



Coronavirus in Europe appears to be on the retreat, with Germany and Portugal reporting consistent decreases in case numbers. If this trend continues Angela Merkel believes travel inside the bloc will be possible this summer with the help of a vaccine passport system that will keep a lid on the virus, while also unlocking regional economies. Around 30% of people in the EU have received at least one dose of the vaccine, with Germany administering a record 1.1 million doses on Wednesday of last week. The EU recovery fund is also another boost to the bloc which should help the return to pre-pandemic levels of growth over the next five years.

  • Italian Industrial Production m/m looks set for a marginal rise to 0.5% vs 0.2% previously.
  • Eurozone ZEW Economic Sentiment is scheduled to be released on Tuesday, forecast at 68.0 vs 66.3 previously, indicating a uplift in sentiment.
  • The European Commission will release their EU Economic Forecasts this Wednesday which will provide more indication on the health of the economy.
  • Banks in France and Germany will be closed on Thursday for Ascension Day.



The US job market added fewer than expected jobs last week adding just 266,000 last month, far lower than the 770,000 in March. This has taken the pressure off the Federal Reserve who have been hit with calls to reduce monetary support. Until levels of employment reach appropriate levels, tapering looks unlikely in the near term. The call for additional fiscal support also doesn’t look to be fading with a new $4.1tn infrastructure package being proposed by the Biden administration. Vaccination rates are also beginning to slow, with the daily rate dropping to two million a day on Saturday which indicates a 20% drop from the week prior.  

  • CPI m/m is forecast to read marginally lower than the pervious month at 0.2% compared with 0.6%. While Core CPI m/m is expected to remain unchanged at 0.3%.
  • Unemployment Claims look set to creep up slightly to 500K from 498K the previous week.
  • Retail Sales m/m are forecast lower at 1.0% vs 9.8% last month. The same is true for Core Retail Sales m/m expected to read 0.8% vs 8.4% previously.
  • Consumer Sentiment does look to be on an upward trajectory forecast at 90.2 vs 88.3 last month.


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