Analysis / Daily / Finance / forex

Pound faces little risk whatever election outcomes is

There is only a small risk to sterling from any political uncertainty following Britain’s national election on May 7, according to over a half of the foreign exchange strategists questioned by Reuters in the past week. Sterling forecasts were left relatively unchanged. Similarly, economists still say they expect the Bank of England to hold off on raising interest rates from their record low until early next year as it waits for inflation to pick up. Thursday’s ballot will be one of the closest fought in decades but still 17 of 31 strategists said the outcome posed little risk to their forecasts. Three said there was none and the remaining 11 said there was a major risk. “A hung parliament is being already discounted. As such this should not harm sterling so much,” said Asmara Jamaleh at Intesa Sanpaolo. But even as the election looms, forecasts for Sterling were little changed from an April poll. GBP/USD, trading around $1.51 yesterday, is set to weaken to $1.50 in a month and then to $1.47 in six months where it will be a year from now. GBP/EUR has been maintaining the recent weeks’ average level – 1.35

The euro rose modestly against the U.S. dollar yesterday snapping a three-session skid, as concerns related to the Greek debt crisis and the timing of an interest rate hike by the Federal Reserve remained in focus. EUR/USD rose 0.0039 or 0.35% to 1.1186 in U.S. afternoon trading, after falling to a session-low of 1.1066 on a choppy session yesterday. Earlier, the pair reached a daily-high of 1.221 in European afternoon trading. EUR/USD had been in a holding pattern between 1.05 and 1.10 since mid-March until the euro rallied significantly against the dollar early last week. The pair likely gained support at 1.0858 the low from April 28 and met resistance at 1.1291 the high from May 1. In Brussels, talks between Greece and its euro zone creditors were put on hold until Athens agreed to further reform measures deemed necessary to unlock critical aid, Pierre Moscovici, the European commissioner for Economic Affairs, told reporters on yesterday. Still, Moscovici struck an optimistic tone in an interview with Euronews, describing the negotiations as amicable and holding out hope that a deal can be reached at the next euro group meeting on May 11.

The dollar pushed lower against a basket of other major currencies yesterday, after the release of mixed U.S. economic reports did little to support optimism over the strength of the nation’s recovery. In a report, the Institute of Supply Management said its non-manufacturing purchasing manager’s index rose to a five-month high of 57.8 last month, above forecasts for a reading of 56.2 and up from 56.5 in March. The data came after the U.S. Bureau of Economic Analysis reported that the U.S. trade deficit widened to $51.37 billion in March from a deficit of $35.89 billion in February, whose figure was revised from a previously reported deficit of $35.4 billion. Analysts had expected the U.S. trade deficit to widen to $41.2 billion in March. In addition, financial firm Markit said its final reading of the U.S. services purchasing managers index slipped to 57.4 in April, a level that was down from both the preliminary April reading of 57.8 as well as the final March reading of 59.2. The U.S. dollar index was down 0.40% to 95.20, after rising to 96.10 earlier in the day

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