The Queen’s Speech. Can May and the Pound Turn a Corner

A lighter economic calendar hasn’t held eased volatility in the currency markets, with central bankers doing their part to guide spice things up, leaving the pound under continued pressure, reversing last week’s gains off the back of the MPC monetary policy decision.

The gains came despite weak economic data, though the upside was likely to be short lived, whether Carney brought the house down or stood back and allowed the British government to do their worst.

Today’s Queen’s Speech is the main event of the day, the delay having been a negative for the pound, a reminder to the markets of the disarray the now minority government is in going into Brexit negotiations, which managed to start on Monday as scheduled.

We will expect the markets to have the checklists out to identify where Theresa May has had to backtrack on policies, with negotiations ongoing for support from the DUPs, with members of the Conservative Party openly stating that this will be May’s first and last.

There would have been quite a different tone should the Tories have won with a landslide victory, but alas the leader of the Tory Party will need to continue eating humble pie with any Theresa May comparisons to the Thatcher of the 80s now all but gone.

The Tories will need to hold on to power, but uncertainty lies ahead of the Queen’s Speech as even the leader of the Conservative Party is unsure of whether there will be the full support of the much needed DUP MPs to secure the majority. DUP sources had spoken on Tuesday of disagreements between the two parties, with Theresa May having failed to secure an agreement going into today’s Queen’s Speech, despite claims that an agreement had been formed more than a week ago.

With the Tory party manifesto likely to be largely scrapped, the result of the General Election a clear statement from voters of a lack of support, focus is expected to be primarily on Brexit, May’s vision of a hard Brexit also out along with the Tory Party manifesto, May’s hand forced during the 1922 Committee meeting, the Tory Party leader told to listen to the people and align the terms under which Britain will leave the EU more aligned with sentiment during the EU Referendum and the key reasons as to why the nation voted to leave.

If the Tories had any hopes that the latest election result was going to have limited impact on Brexit Secretary Davis’s position of strength at the table, Monday’s concession on prioritizing terms under which Britain will be leaving the EU over discussions on trade was another blow.

For Theresa May, the good news will be that there will be more time to continue dialogues with the DUP, MPs scheduled to vote on the Queen’s Speech on Wednesday and Thursday of next week, while debate over the Queen’s Speech kicks off this afternoon, once MPs have been sworn in.

The Queen’s Speech commences at 1130 this morning, UK time, with the Queen Speech debate kicking off at 230 this afternoon. With the PM on the ropes, it’s likely to have a little more vim than normal…

At the time of the report, cable was down 0.27% at $1.2595 with more losses more than likely ahead of the speech in what’s likely to be a choppy day for the pound.

Elsewhere, there are no material stats out of the Eurozone to provide direction for the EUR, which has held its ground against the Dollar through the early part of the day, down just 0.01% at $1.11324, while the Dollar will have more than FOMC member commentary to contend with later in the day, with May’s existing home sales scheduled for release. Sales are forecasted to fall further, which will be Dollar negative, though they will have to be pretty bad for the Dollar to tumble, sentiment towards monetary policy continuing to favour the Dollar, albeit marginally.

At the time of the report, the Dollar Spot Index was down just 0.01% at 97.746, with the Dollar likely to be in favour through the European session, the pound under obvious strain and the EUR likely to struggle for direction with the lack of stats.