GBP/USD Fundamental Forecast – May 6, 2016

The GBP/USD was flat today at 1.4497 remaining near the top of its May trading range as it seems that Brexit is no longer a scare for traders. London citizens go to the polls today in a series of local and legislative elections that will deliver a new mayor for London, continued nationalist government in Scotland and the voters’ first verdict on Jeremy Corbyn’s leadership of the opposition Labour Party.

The results will be pored over for any hints about voter sentiment going into the referendum on European Union membership in seven weeks, but it’s the fate of Labour that’s likely to make the most immediate waves. Elections to local councils are generally used by voters to punish the national government, which is why for three decades; the main opposition party has always gained seats outside general election years. You have to go back to 1985, close to Labour’s post-World War II low, to find the last time the party went backward while in opposition.

According to Bloomberg with the Brexit referendum on June 23, voter awareness of the party should be at a high. Of the more than 2,700 seats up for election, Colin Rallings and Michael Thrasher, professors of politics at Plymouth University, forecast UKIP will gain 40. They predict Labour will lose 150.

A good showing for UKIP may spark renewed market concerns over the possibility of Brexit, according to analysts at Nomura and Jefferies. A gauge of services fell to its lowest level in more than three years in April, following bigger-than-expected declines in manufacturing and construction surveys released earlier this week.

The BOE has already said the buildup to the June 23 vote is weighing on confidence and investment, and warned the impact could be more severe if the U.K. votes to leave the bloc in a so-called Brexit. Markit’s composite PMI fell to the lowest in more than three years last month.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Upcoming Economic Events that you should be monitoring:

Friday, May 6, 2016

Government Bond Auctions

Date Time       Country           Auction

May 05 10:30 Spain Holds bond auction

May 05 11:00 Austria Holds bond auction

May 05 11:30 UK Gbp 2.5bn 1.5% 2026 Gilt

May 09 17:20 Italy Announces details of bond auction

May 09 N/A Ireland Details of bond auction on May 12

May 10 11:30 Germany Holds I/L bond auction

May 11 11:03 Sweden Holds bond auction

May 11 11:30 Germany Eur 5bn Jun 2018 Schatz

May 12 11:10 Italy Holds bond auction

May 12 17:20 Sweden Details of I/L auction on May 19

May 12 N/A Ireland Holds bond auction