The week in markets – June 8th

by Jun 8, 2017

The market view

Britons go to the polls today to decide the outcome of the snap election brought forward by Theresa May only weeks ago. Markets had bet on a Conservative victory after Labour was heavily defeated in local elections, but now polls have shown the gap has significantly narrowed between both parties. Due to this gain for the Labour party, analysts expect the Pound to come under pressure from the uncertainty generated by a potential new government in the midst of Brexit negotiations.

invstr players are more optimistic however, and have predicted that the price will remain relatively stable, keeping its head above water throughout the rest of 2017 at over $1.3 per £1:

OPEC has been in the firing line again this week. Concerns that the cartel aren’t effectively reducing the glut of oil that has suppressed prices around the globe are weighing them down further. Yesterday saw one of the sharpest drops in the price of Brent crude for months. The price drop was accelerated after more data revealed a significant increase in US oil supplies, undermining OPEC’s effectiveness.

invstr players are fairly positive about oil however. They don’t seem to foresee any great price swings aside from steady increases throughout 2017:

Former FBI Director James Comey is testifying before the US Senate today about the administrations links to Russia amongst other topics. Legal experts agreed that James Comey’s account of his nine conversations with Donald Trump earlier this year presented strong evidence of obstruction of justice and an attempt to bury an investigation into the Trump campaign’s contacts with Moscow. However, there were many mixed opinions on whether it would be enough for a conviction, or impeachment. Articles of impeachment would have to be passed by the House of Representatives, and most Republicans on Wednesday evening appeared to come together in support of Trump, despite the release of the full details of Comey’s statement.

Players on invstr are slightly bearish on US treasury yields, implying that uncertainty will continue into the future:

Elsewhere, another market moving event took place today. The European Central Bank under Mario Draghi has increased its forecasts for economic growth in the eurozone but kept interest rates on hold. Draghi also hinted that there was no need to cut rates further, in what investors will perceive as a vote of confidence in the recovery of the bloc.

He told a press conference: “We are now confident that inflation will converge with our objectives.” The ECB now say they expect growth across the eurozone to be 1.9% in 2017 compared with its March forecast of 1.8%.

Earlier on Thursday, the Eurostat statistics agency had said the eurozone economy had grown at its fastest rate in a year during the January-to-March quarter. At that rate, countries that use the single currency (Euro) would see growth at 2.3% this year, nearly double the rate of the US, which is expected to grow a weaker 1.2%.

However there are still potential political upsets that could yet take place in Europe. Clear tension between Angela Merkel and Trump may alter the relationship between the US and EU. On top of this, early elections may be held in Italy in September. invstr players are neutral on the strength of the Euro despite all the positive news:

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