The British pound is trading quietly in the Thursday session. In North American trade, GBP/USD is trading at 1.2930. It’s Election Day in the United Kingdom, and there are no British economic events. In the US, unemployment claims dipped to 245 thousand, but was higher than the estimate of 241 thousand. On Friday, the UK releases Manufacturing Production, which is expected to rebound and post a gain of 0.8%.
It’s Election Day in the UK, as an election campaign marred by deadly terrorist attacks has ended. What started out as a cakewalk for Theresa May’s Conservatives has turned into a fiercely fought campaign, as May’s comfortable lead in the polls has been seriously eroded by the rejuvenated Labour party, lead by Jeremy Corbyn. May called a snap election just six weeks ago, and Brexit was supposed to be the primary issue facing voters. However, terror attacks in Manchester and London have left voters fearful about their safety, and the fight against terror has become the number one issue in the campaign. It remains unclear what the political landscape will look like on Friday morning. May remains ahead in the opinion polls, but the key, unanswered question is will she garner enough seats to win a majority. The markets have priced in a May victory, so the pound could bump a notch higher if she gets her majority. If not, May will only be able to govern at the grace of a hostile opposition. Such a scenario would seriously hinder May in upcoming Brexit negotiations with the European Union. If no party wins a majority, there is the possibility of Labor and the Liberal Democrats joining forces to form a coalition government, leaving the Conservatives in opposition. This would create even more uncertainty around Brexit and the pound could respond with sharp losses.
Washington is buzzing with excitement, as former FBI director James Comey is currently testifying before the Senate Intelligence Committee. Comey started off by saying that he was not specifically asked by President Trump to close an investigation into Trump’s alleged ties with Moscow, so it is unlikely that his testimony will be the "smoking gun" that leads to charges of obstruction of justice against Trump. Still, Comey’s testimony could raise troubling questions about Trump’s conduct, and will only complicate matters for the beleaguered Trump administration. Investors are growing more skeptical that Trump, who seems to be spending most of his time in damage control mode, will be able to deliver on key promises, and may come to view the president as a lame duck, just months into his presidency. This kind of sentiment could weigh on the US dollar.
