Theresa May won’t attempt to put her Brexit deal to politicians again before next week’s local elections which may result in heavy Conservative losses and heighten the probability of a general election. It now seems inevitable a UK withdrawal agreement won’t be concluded before EU elections later next month. A populist surge is equally a risk for both sets of elections and may result in a whole host of new issues during the remainder of the UK’s steadily-decreasing Brexit timeline. The prospect of more positive US economic news could leave the Pound on the back foot against the Greenback, but the outlook against the Euro may yet be more upbeat.
The DXY Dollar Index pushed higher again, closing in on levels not seen for two years. The Federal Reserve may be maintaining its dovish tone but today’s US Q1 Gross Domestic Product (GDP) growth reading is expected to impress and may meaningfully shift the conversation. US-China trade talks continue to roll on, but hopes are high that a resolution will soon be seen. This could be sufficient to drive support for other currencies and help cap the Greenback’s recent appreciation.
The Pound tested fresh two-and-a-half-month lows against the US Dollar during yesterday’s session, making for eight consecutive days of losses on the pair. Overall the trend remains negative, and with little UK economic data due for release before the weekend break, further losses could materialise.
After midweek losses for the Euro against the US Dollar, the pair has been trading in a relatively narrow range. However, expectations are running high that today’s US GDP print will impress, and this could be sufficient to see the Euro lose further ground in the short-term.
The fact that the political situation in London hasn’t deteriorated any further does seem to be lending a degree of support to the Pound against the Euro. While Brexit remains a dominant theme, next week’s UK local elections have the potential to strike Sterling hard, at least in the short-term.