Daily Economic Commentary: United Kingdom

Strong economic data propelled the GBPUSD to a high of 1.5127 yesterday, allowing the pound to erase its losses from last week. The GBPJPY also edged higher, reaching a high of 140.56 and marking its seventh day in consecutive rallies.

The Nationwide HPI printed a 0.7% increase in house prices for March, outpacing the consensus of a 0.2% uptick. This was a solid rebound from the 0.8% slide seen in February. It turns out that home owners postponed listing their properties online, causing housing demand to climb.

Meanwhile, the fourth quarter GDP enjoyed an upward revision from the previously reported 0.3% to 0.4%. The pound then banked on the news that the UK’s economic expansion was slightly stronger than initially announced.

Furthermore, UK’s current account balance came in better than expected as the deficit narrowed from 5.9 billion GBP to 1.7 billion GBP in the fourth quarter. The smaller deficit was mostly a result of a higher surplus in income and trade services for the period.

The only disappointing piece of economic news from the UK yesterday was its GfK consumer confidence reading. The report showed that consumers were a bit more pessimistic in March as the index unexpectedly dipped from -14 to -15. The pound pairs retreated after the release of this report but were able to get back on their feet immediately.

Looking ahead… Well, the economic coast is clear for the UK, at least for today. It’s next set of economic reports which are due Thursday include the Halifax HPI, manufacturing PMI, and BOE credit conditions survey. Would we see another wave of upbeat figures from the UK? Stay tuned!

The pound extended its winning streak against the dollar and yen yesterday to four and six, respectively. The Cable (GBPUSD) rose to and closed at 1.5174 from 1.5069. The Guppy (GBPJPY) also reached 141.87 from 139.83.

The UK did not release any economic reports yesterday. Risk appetite in the forex market, however, drove the anti-dollars like the pound higher.

Today at 8:30 am GMT, the UK’s manufacturing PMI for the month of March will be published. The index is seen to rise to 56.8 from 56.6. An increase in this account indicates an improving business condition in the UK’s manufacturing sector and therefore would usually be bullish for the GBP. It looks like the GBP bulls will be celebrating again if the index comes in at least in line with expectations.

Thanks to improved risk appetite, the GBPUSD was one of the greatest performers last week, rising up more than 250 pips to close out last Friday above the 1.5200 handle. Given the strong case of risk appetite, would we see the GBPUSD stage another stellar rally this week?

The only obstacle that held back the GBPUSD’s advance last week was the worse-than-expected results of the US non-farm payrolls report. It came out with a reading of 162,000, lower than the 185,000 gain initially predicted. This dampened risk appetite, causing the GBPUSD to fall 100 pips to 1.5200 from its highest price level last week.

No data is expected out of the UK today, but expect a lot of economic events, particularly the BOE’s interest rate decision, are coming up ahead.

First up, the Halifax Bank of Scotland house price index, will be released either tomorrow or on Wednesday. The report, which measures the change in the selling prices of homes funded by the HBOS, is expected to show 0.6% increase in March, opposite the 1.5% decline from the month before.

On Wednesday, at 8:30 am GMT, UK’s services purchasing managers’ indexwill be released. The services PMI is designed to see whether UK’s services sector is growing or not. A reading above 50.0 indicates expansion while a reading below 50.0 means otherwise. The forecast for March is a reading of 58.2, slightly lower than February’s 58.4.

On Thursday, UK’s manufacturing production report and the BOE’s interest rate decision are due. The manufacturing production report, which will be published at 8:30 am GMT, is predicted to show a 0.7% rise in February after dropping 0.9% the month before. On the other hand, at 11:00 am GMT, the Bank of England will announce its decision on interest rates. As usual, it is widely expected for the BOE to keep rates steady at 0.50% and hold off expanding its quantitative easing program.

It looks like a lot of positive expectations for economic data this week… If we see these reports come out on target, or even better-than-expected, we could see another run in risk appetite, which would help the GBPUSD regain the losses it experienced during the first quarter of 2010.

Relatively tight trading on the cable yesterday, as it stuck within a range of about 80 pips. With some economic reports on deck today, could we see some stronger moves?

At 8:30 am GMT, the construction purchasing manager index is scheduled for release. The index measures the confidence of business managers in the construction industry, with 50.0 being the score that separates contraction from expansion. Projections are for a reading of 48.8, which would be a slight improvement over last month’s release of 48.5. Now, if the index comes in to post a score above 50.0, indicating actual expansion, this could send GBP bulls jumping for joy!

Later on at 11:00 pm, the nationwide consumer confidence index is due. The index has been steadily improving the past few months, printing a score of 80 last month. Today’s release is projected to come out at 81. Have consumers become confident over the economy? Or have they become more concerned, especially given the uncertainties in the political arena? We will have to wait and see!

Tomorrow will be busy once again, as both the Halifax housing price index and the services PMI reports are due. Housing prices are seen to have risen by 0.6% in the past month, while the services PMI is expected to have remained relatively steady with a reading of 58.2. Normally these are considered to be high impact reports, but it will be interesting to see the markets react to them. After all, we’ve got the BOE’s interest rate decision coming in on Thursday…

V for victory! The pound successfully pulled up from its sharp dive against the greenback and etched a nice V-formation on the GBPUSD 1-hour chart. The question is: Would the pound be able to sustain its rally or would it resume its dive later on?

Earlier during the day, UK Prime Minister Gordon Brown announced that the general elections will be held on May 6. This caused fears of a hung Parliament, wherein no political party holds majority of the seats, to resurface. A hung Parliament - no connection to William Hung whatsoever - is an unfavorable political situation since split decisions between the House members could delay important government decisions.

Fortunately for the pound, UK’s construction PMI came in better than expected. The March reading climbed from 48.5 to 53.1, past the 50.0 mark which indicates that the industry is expanding. This marks the indicator’s 2-year high as new orders for housing and commercial sectors surged in March. As a result, the GBPUSD landed back above the 1.5200 mark and climbed higher after the US Fed delivered skeptical comments concerning their monetary policy.

It’ll be the services sector’s turn to release their March PMI reading today at 4:30 am GMT. The PMI could dip from 58.4 to 58.1, implying that the expansion in the industry slowed a bit during the month. A weaker than expected figure could force the pound to return its recent gains.

The pound received another pounding from the yen and the greenback yesterday. The Guppy (GBPJPY) fell and closed at 142.26 from 143.17. The Cable (GBPUSD) also slid to 1.5247 from 1.5279.

The UK’s services PMI dipped more than expected to 56.5 in March from 58.4, indicating that the growth in the UK’s service sector had slowed. Services grew at its highest rate in February as businesses tried to get back on the game after being benched by the harsh winter conditions. Activity, however, dipped in March when new businesses were a lot lesser than projected.

The pound weakened following the report.

The UK’s Halifax HPI and February industrial and manufacturing production will be on tap later at 8:30 am GMT. House prices are seen to have gained by 0.65 after dipping by 1.5% during the previous month. Both industrial and manufacturing productions are also expected to have risen by 0.5% and 0.7%, respectively. Positive results in these accounts could halt the pound’s present decline.

  The market will probably focus on the [Bank of England](http://www.babypips.com/forexpedia/BOE)’s [interest  rate](http://www.babypips.com/forexpedia/Interest_rates) and asset facility program decision today at 11:00 am GMT though.  The bank is seen to maintain its interest rate at 0.50% and its asset  purchase facility program at £200 billion. According to some economists,  the bank is likely to hold their easing programs until November since  the economy is still in a fragile condition. They said that it is vital  for the bank to keep the interest rate low in order for the economy to  sustain its recovery. Doing so, however, would be bearish for the GBP.

Thanks to the positive results of economic data released yesterday, the pound was able to take back the ground it lost against the dollar during the Asian trading session. The GBPUSD ended the day at 1.5273.

The Halifax house price index, which measures the monthly average change in price of selling homes financed by the Halifax Bank of Scotland, showed an unexpected increase of 1.1% in March, almost double the forecast.

The manufacturing production report released soon after was also able to beat expectations. It revealed that production in March surged by 1.3%, opposite the 1.0% decrease in February and higher than the 0.7% rise initially predicted.

The slightly dovish tone of the BOE interest rate decision put a cap on the pound’s rally though. The Bank of England said in its statement yesterday that they decided to keep rates on hold at 0.50% and maintain its 200 billion GBP quantiative easing program because the British economy is still “vulnerable.” The bank’s statement gave traders reason to believe that interest rate hikes probably won’t occur until next.

The important data to watch out for today is UK’s producer price index at 8:30 am GMT. The PPI measures the change in price of raw materials bought by manufacturers from their suppliers. The PPI is generally used by traders as a leading indicator of inflation, because businesses tend to pass on additional costs they incur to their customers. The forecast is for another increase in March, this time by 1.3%.

The pound rallied nicely last Friday, as GBP bulls reacted favorably to the risk appetite soup that was served. With the GBPUSD gapping up over the weekend to open above key resistance at 1.5400, will the pair continue to surge higher?

A report released last Friday showed that producer prices rose by 3.6%, beating consensus of a rise of just 1.3%. Remember, rising producer prices could signal rising inflation, as companies normally like to pass additional costs over to their customers. Also, take note that rising inflation would signal to the BOE that they might need to ease off on their quantitative easing measures, such as having low interest rates.

What boosted risk appetite however, was news over the weekend that the EU was giving Greece a bailout package, after Fitch had downgraded their debt to BBB-. I’m going to be monitoring this and I’ll keep you posted on any developments on this, as it will have a significant impact on risk sentiment.

Looking ahead at the [=&currency[]=AUD&currency[]=CAD&currency[]=CHF&currency[]=EUR&currency[]=GBP&currency[]=JPY&currency[]=NZD&currency[]=USD&importance[]=&importance[]=3&importance[]=2&importance[]=1&submit=Submit"]economic calender](Forex Economic Calendar[), it looks like we’ve got nothing coming out today, so I suggest you take note of reports and news (ahem, GREECE!) coming out from other countries today.

Things will begin to heat up tomorrow, as the BRC retail sales and RICS housing price balance reports due tomorrow at 11:00 pm GMT. Last month, members of the British Retail Consortium revealed that retail sales rose by 2.2%. Meanwhile, only 1.7% of property surveyors are expected to report that housing prices rose last March, a major drop from February’s figure of 17%. If these reports come in worse than expected, we may see the GBPUSD dip to fill up the gap it formed over the weekend.

After taking a huge leap during the weekend, the pound slid back down against the greenback and the yen in yesterday’s trading. Weak economic data, along with the uncertainty surrounding next month’s elections, weighed on the pound.

The RICS house price balance for March showed that less surveyors are reporting house price increases in their area. The consensus was that 18% of surveyors would post house price gains for March, same as in February. However, the actual figure came short and landed at 9% only.

Furthermore, many are starting to worry that asset prices could continue to fall if the upcoming elections result in a hung parliament, wherein no political party holds majority of the seats in parliament. Such political stalemate could also delay the implementation of laws designed to trim the UK’s bulging deficit.

On a more upbeat note, the BRC retail sales monitor printed a 4.4% year-over-year increase in March, twice as much as the 2.2% annual retail sales growth seen in February. Components of the report showed that the additional spending, particularly on food, during the Easter holidays was a key factor in boosting sales. However, this strong report was unable to provide support for the pound.

UK trade balance figures are on tap for today. Their trade deficit is expected to narrow from 8.0 billion GBP to 7.3 billion GBP in February. Judging from the considerable improvements in industrial production and manufacturing activity for the month, we might be in for an upside surprise come 8:30 am GMT.

The GBP closed in a mixed fashion yesterday. The Cable (GBPUSD) fell to and closed at 1.5364 from 1.5372. The Guppy (GBPJPY), in a similar way, also slipped slightly to close at 143.14 from 143.34.

The UK’s trade balance in February unexpectedly improved to -£6.2 billion from -£8.1 billion. Initially, the country’s trade deficit was only seen to narrow to -£7.3 billion. The surprise result then gave traders a reason to buy up the GBP after when the number was released. The pound, however, continued to range until the end of the day.

Later today (11:01 pm GMT), the UK’s nationwide consumer confidence index will be on tap. The index likely reached 81 during the recent month, from it’s previous reading of 80. Confidence in the UK has been faring better as of late given the positive developments in its economy. A gain in this account, especially if the number comes in better than expected, could give the GBP some support.

Thanks to the slight case of risk appetite, yesterday’s trading session turned out to be a great one for the pound. The GBPUSD and GBPJPY closed out the US trading session with significant gains, ending at 1.5372 and 144.68 respectively.

Earlier today, the Nationwide’s consumer confidence survey for March came out. It printed a reading of 72, lower than both the forecast and the previous month’s reading. This indicates that consumers became less optimistic about UK’s economic conditions, which could put some downward pressure on consumer spending in the long run.

No more important economic data set for release from the UK for the rest of the day so the pound’s price action would probably be dictated by news coming out of the US.

Despite some strong moves by the dollar, the pound amazingly posted some gains versus the greenback. The GBPUSD pair closed trading just under the 1.5500 handle. Is the pound for real? Or was it just a lucky day?

With a pullback on risk appetite yesterday, it was quite amazing to see the pound hold on to its gains versus the dollar, even as no economic data was released. Still, that could all change today, as we’ve got some political debates on the tube.

The reason why this is important is because there is a lot of uncertainty as to which party the British public is leaning more towards. Is it the Conservatives? Or is it the Labour party? Without getting into the nitty gritty of what these two political blocs stand for, the reason why analysts and traders are concerned about the outcome of the elections is because there is chance that it may end in a “hung parliament”.

A hung parliament is a scenario where there is no majority or ruling party.

With no majority party in parliament, this could delay any concrete plans towards reducing the UK’s debt. It’ll be interesting to see who comes out ahead in the debates and how the British public reacts to them. In any case, be sure to be mark this down on your schedule and watch out!

Another huge gap to start the week? Unlike last week, when the pound enjoyed an upward gap during the weekend, pound pairs saw a downward gap this time around.

The reason why the pound started off on such a sour note is probably the ongoing political fears in the UK. The latest elections survey showed that the lead between the Conservatives and the Labor Party narrowed from 9% to 6%, increasing the likelihood for a hung parliament, wherein no political party holds majority of the seats in parliament. If both parties have different opinions on how to tackle UK’s economic problems, the British government could find it more difficult to find and implement solutions to these.

Aside from that, news of the SEC’s fraud accusation to Goldman Sachs spurred risk aversion and pumped up demand for safe-haven assets.

On the economic front, the freshly released Rightmove HPI report showed that asking prices for homes climbed by 2.6% in April after posting a mere 0.1% uptick in March. According to Rightmove, the rise in house prices was a result of the strong demand for homes during the month.

Tomorrow, the UK is set to release its inflation reports at 8:30 am GMT. Its CPI is expected to climb by 3.2% year-over-year in March while its core CPI could post an annualized 2.8% increase. Hmm, it seems like inflation has already picked up for the UK economy… Could this mean that the BOE would consider ending its quantitative easing programs soon?

Minutes of the BOE’s latest monetary policy meeting are due Wednesday. Would the BOE policymakers still be unanimous with their decision to keep their asset purchase program unchanged? Stay tuned at 8:30 am GMT to find out. Also due Wednesday is UK’s claimant count change, which could show a 5.7K decrease in the number of people claiming unemployment benefits for March.

On Thursday, UK will release its public sector net borrowing report, retail sales, preliminary mortgage approvals, and CBI industrial order expectations reports. Whew, that’s a lot for a day! Public sector net borrowing is expected to climb from 12.4 billion GBP to 24.2 billion GBP in March while retail sales are estimated to post a 0.7% uptick. Mortgage approvals and industrial order expectations are also gunning for improvements for the month.

Last but not the least, on Friday, the UK will release its preliminary GDP report for the first quarter of 2010. Another 0.4% expansion is expected for the quarter and a better than expected figure could provide support for the pound.

After dipping sharply during the Asian and European sessions, the pound made a V-turn to recover most of its losses against the dollar and the yen. The GBPUSD rose to and closed at 1.5339 after reaching a low of 1.5192 from 1.5363. Similarly, the GBPJPY reached and settled at 141.72 after touching a low of 139.39 from 140.66.

No economic reports came out of the United Kingdom yesterday. Selling pressure, however, was felt by the pound as the issue regarding Goldman Sachs’ fraud still lingered in the mind of the market. The pound then reversed its course sharply when the fraud charges that was pressed on the company only secured a 3-2 vote, suggesting that the case against it was not founded strongly.

The UK’s March CPI and RPI are due today at 8:30 am GMT. The UK’s headline inflation number is seen at 3.2% on a year-over-year basis in March while the country’s retail price index or RPI likely reached 4.1% from 3.7% during the same period. An increase in these accounts could mean that business activity in the UK had improved. Such, therefore, could be bullish for the GBP.

Yesterday turned out to be a magnificent one for the pound, as it was able to post some gains against both the dollar and the yen. The Cable ended the day at 1.5363, while the Guppy closed out the day at 143.19.

The pound’s appreciation yesterday was mostly caused by the better-than-expected data that came out of UK. The country’s consumer price index, which was initially predicted to reveal an increase of 3.2% in prices for the month of March, showed a 3.4% climb instead. Meanwhile, the core version, which excludes the prices of volatile items such as food, booze and energy items, reported a 3.0% rise.

I find it quite odd for currency traders to buy up the pound on the data. Normally, it is said that the inflation rate and unemployment rate are inversely related. This means that inflation rates are usually during times of low unemployment. Conversely, a period of high unemployment is accompanied by low inflation. In due time, the rising prices of goods and services will overwhelm job creation and put some serious downward pressure on UK’s growth. The pound could experience a serious beating once this sinks into the mind of currency traders… Stagflation, anyone?

For today, watch out for data concerning UK’s labor market and the Bank of England’s meeting minutes at 4:30 pm GMT.

The labor market report is expected to show that employee weekly earnings including bonuses grew 2.4% and that the country’s unemployment rate remained at 7.8% in February. Meanwhile, the number of people who filed a claim for unemployment insurance is predicted to have fallen by 10,000 in March. If the actual reduction comes in larger than consensus later, we could see the pound be bought up again.

As for the BOE meeting minutes, it is widely expected that all of the nine members of the Monetary Policy Committee voted to keep rates unchanged at 0.50%. Given this, the breakdown of the MPC’s interest rate votes probably wouldn’t garner much attention. Traders would most likely focus on the BOE’s outlook and assessment on UK’s economy.

Another wonderful day for those pound bulls, as the GBP posted some gains against both the dollar and the euro. Cable closed almost 40 pips higher to end at 1.5409, while the EURGBP closed below last week’s low, finishing at 0.8696.

Yesterday, we got a bag of mixed labor market data. First the bad news – the unemployment rate rose higher than anticipated, rising to 8.0%, after forecasts were for the rate to remain steady at 7.8%. This marked its highest level in 16 years!!! As long as unemployment woes remain a tough nut to crack, it will be difficult for the UK economy to get back on track (ha – I just rhymed!).

The good news though, was that the number of people who filed for unemployment benefits fell by 32,900, beating consensus of a drop of just 10,000. It looks as if traders saw this as encouraging news, as the pound was bought up immediately after the release of the data.

In other news, the Bank of England decided to keep its asset purchase program at its current level of 200 billion pounds. BOE Governor Mervyn King pointed that the UK hadn’t really shown any signs of strength in the past month to alter the MPC’s view on the economy.

The committee though, is concerned about the prospect of rising inflation. Recent inflation data has shown that inflation has exceeded the BOE’s target of 2.0%. If this keeps up, it may force the BOE to withdraw its quantitative easing measures and to raise interest rates, even if the economy is still unstable.

We could be in for more swashbuckling action today, as we’ve got some red flags going up on the economic pole today at 8:30 am GMT. Monthly retail sales data are expected to reveal that sales rose by 0.7% in the previous month. This account has caused some strong moves in the past, so watch out if the figures come in worse than expected – it could trigger wide spread pound selling.

Mortgage approvals are seen to have risen to 51,000 in the past month, up from 48,000 in February. This would be an sigh of relief for the housing market, as mortgage approvals have failed to hit their targets the past 3 months running.

Also due are public sector net borrowing figures. Consensus is that the government overspent its budget by 24.1 billion pounds last March, up from the 12.4 billion deficit in February. If the deficit comes in much larger than anticipated, could this trigger more concerns about the government’s debt problems?

Speaking of the government…

The second episode of a series of political debates will be on air today. Current polls have shown that the incumbent Labour party, led by Prime Minister Gordon Brown, have been losing more and more support David Cameron’s Conservative party. This is a cause of concern, as this could lead to a hung parliament come election time next month. Remember, a hung parliament is a situation where no political party has majority power, which would make the passing of laws on critical issues (ahem, DEBT!) hard to pass.

Phew! That was a long one! To recap – we got mixed data from labor market yesterday, but the pound still remained up. Today, we’ve got public finance figures, mortgage approvals and retail sales data, but we should all turn on the tube and keep an eye out on those political debates!

Oh bugger! The cable was unable to hold on to its recent gains as it slid back below the 1.5400 handle yesterday. The guppy was a bit more fortunate since it kept within its range after hitting a high of 144.19.

Weak economic reports were most likely the reasons why the pound held back from rallying during yesterday’s trading sessions. March retail sales only saw a 0.4% uptick instead of the projected 0.7% growth. This was also much lower than the upwardly revised 2.5% increase in retail sales for February, reflecting how consumers toned down their spending.

Another disappointing piece of economic data was the CBI industrial orders reading for April, which fell short of expectations. The index was expected to climb from -37 to -32 this month but instead climbed one notch higher to -36 only. Since the reading is still in the negative zone, it implies that manufacturers are expecting decreasing order volumes in the next three months.

Also released yesterday was the UK public sector net borrowing report which shows the difference between the government’s spending and borrowing. Net borrowing stood at 23.5 billion GBP in March, more than twice as much as the 9.7 billion GBP net borrowing for the previous month. In fact, this March deficit is the largest since 1993! This brought the UK’s annual budget deficit to 152.8 billion GBP, its highest level since World War II! Uh oh, this swelling deficit can’t be too good for the UK and the pound…

Add to that the ongoing political concerns and fears of a hung parliament after their general elections in May. If no political party holds majority of the seats in parliament, it could be tougher for them to agree on how to solve UK’s debt problems.

On a more upbeat note, mortgage approvals in the UK reportedly rose to 52,000 in March, a nice rebound over the 48,000 figure seen in February. The negative effect of the severe cold weather on the housing market seems to have faded during the month. Aside from that, the UK government removed the tax for first-time home buyers, stoking demand for new house purchases.

Today is a big day for the UK since it is set to release its preliminary GDP reading for the first quarter of 2010. Their economy is slated to print another 0.4% economic expansion for the quarter and steer clear of recessionary waters. But would the UK be able to pull it off? Our resident economic guru has an interesting take on the UK’s upcoming GDP report in his recent entry so I suggest you read up!

The pound closed mixed in last Friday’s trading session. The GBPUSD dipped slightly to 1.5379 from 1.5386. The GBPJPY, on the other hand, rose to 144.60 from 144.02.

The UK’s first quarter GDP growth was at 0.2% which was weaker than the projected 0.4% expansion. The adverse winter condition that the country experienced during the period slowed down the business activity in the region. The previous quarter’s growth, however, was upped to 0.4% from 0.1%. Still, the less-than-stellar 1Q GDP figure weighed on the GBP.

The UK’s CBI realized sales will be on deck on Tuesday. The index is seen to improve to 16 from 13 in April. The BBA mortgage approvals for the month of March, which is projected to be at 39,300, will also be on tap during that day.

On Thursday, the country’s Nationwide HPI and the result of the GfK consumer confidence survey in April will be released. The selling prices of homes which are backed by Nationwide are expected to rise again by 0.4% on top of the 0.7% gain that it had during the month prior. Consumer confidence, on the one hand, likely inched higher to -14 from -15. An increase in the HPI and an improvement in the consumer confidence index could give the pound some short term support.

Despite the lack of any new economic developments, the GBPUSD was able to slowly creep up above the 1.5400 handle yesterday. The pair ended the US trading session at 1.5457, around 80 pips higher from its opening price during the Asian trading session.

For today, there are two important events of interest on UK’s economic calendar.

First up, at 8:30 am GMT, the British Bankers’ Association will release its mortgage approvals report for the month of March. It is expected to show that the number of mortgages approved for the month grew to 38,500 from 35,276 in February. Since the BBA issues more than half the mortgages in the entire UK, a rising mortgage approval report is usually considered positive for the country’s economy; because it means that more and more people are becoming financially capable of purchasing a house.

Following shortly at 10:00 am GMT, UK’s CBI distributive trades survey is due. The distribute trades survey is designed to see whether retailers and wholesalers think that sales volume is rising or not. A reading above baseline zero means sales are increasing while a reading below zero indicates otherwise. It is expected to print a reading of 16 for this month, up the February’s reading of 13.

Good grief! It looks like politics is dominating the news in the UK, as the results of some recent polls suggested that the UK could indeed be heading towards a hung parliament. And what effect did this have on the pound? Well, the GBPUSD pair dropped over 200 pips from its opening price!

Recent polls have suggested that no political party will come out ahead in the upcoming elections, raising concerns that this could end with the government having a hung parliament. As I’ve said time and again, a hung parliament is a situation whether no political party has a majority power in the government. The reason why this spooks the financial markets is because it could delay any legislation that could be passed. More specifically, it could hamper any efforts towards solving the UK’s debt problems if the parties can’t get along.

In other news, economic data that was released were also weak, as the BBA mortgage approvals and CBI distributive trades survey reports posted disappointing results. Mortgages approvals in March came in at 34,900 after consensus was at 38,000. Moreover, the previous month’s figures were revised down from 35,300 to 33,400! More problems in the housing market eh?

Meanwhile, the CBI report just matched the previous month’s score of 13, after it was expected that it would rise to 16. This indicates that retailers and wholesalers confidence towards future sales remains stable and hasn’t increased.

It looks like the economic calendar is empty today, but I suggest you keep an ear out for any rumblings coming out of the political arena. If more news comes out suggesting that the UK is headed towards a hung parliament, we could see the GBPUSD drop to test its yearly lows.