mind the gap!
This week has got off to a quiet start in financial markets, with a lack of data and the aftermath of position squaring due to the surprise US discount rate hike at the tail end of last week.
The weekend’s Sunday Times / YouGov poll showed the gap between the Conservatives and Labour at just 6 points, the lowest since December 08. Whilst this does raise the chances of a hung parliament in the UK it also necessitates an election campaign where one side cannot just sit back and wait for the other to lose the campaign and now we are likely to see more detailed plans and views for the Economy moving forward that enable the electorate to make a more educated decision on what is becoming increasingly likely to be May 6th. More importantly, more detailed plans will enable the markets to price the value of GBP in relation to the ‘facts’ rather than the negative undertone of uncertainty.
With a lack of top tier data today, and for much of the week there will be an increased emphasis on equity markets and broader risk sentiment in driving foreign exchange rates. The pick of the data tomorrow is the German Ifo – Business climate indicator, which after a slightly better than expected ZEW release will be closely watched for signs of stabilization after the recent declines.