David Cameron’s Conservative Party won the elections on Friday with 331 seats (to Labour’s 232 sets). The majority of seats won by the Conservatives gives birth to the next two big questions about Great Britain. Will the country remain within the European Union? And how the relationship with Scotland will develop? However, in the short term, traders are preoccupied about the interest rate decision that is due today. Markets don’t expect a modification giving the lately political tension, but signals suggesting a positive change are being watched.
The British pound had a positive anticipatory reaction in relation to the Euro and the American dollar, but shortly before the final result of the elections was announced, the Sterling Pound started to fall. The major trend is still upward, while there is still room for corrections.
The American dollar was the favorite on Thursday and Friday as the NFP report was published at 223k and the Unemployment Rate fell to 5.4%, meeting the expectations. The bad news came as the Average Hourly Earnings were reported down to 0.1%. Market participants are still confident that the economy will resume and the monetary policy normalization process will start soon.
The Euro is being weakened by worries about Greece, which risks defaulting on its debt if it does not receive fresh funding. Another Eurogroup Meeting is scheduled today, which was already forecasted to not bring a deal, while the Hellenic state is fast approaching a new deadline (12 of May). Positive news came from the fact that the process of privatization seems to have already started.
China steps up again with fresh stimulative measures as the People’s Bank of China cut the one year lending rate to 5.1% and the deposit rate to 2.25%. The decision wasn’t anticipated as soon, while the cut is smaller than expected. The monetary policy decision comes early after the CPI was announced to fall to 1.5%, while the PPI was reported in line with the expectations (and the last report) to -4.6%. The deflationary pressures seem to be the main cause of this verdict.
The NZDUSD trend has deepened significantly as speculations about a new interest rate cut intensified. The main reasons that attracted such a concern are the near-zero inflation and the level of demand which seems to be getting slower. Surrounded by the PBOC and the RBA, the New Zeeland’s Central Bank may have no choice but to keep up with neighbors’ monetary policy decisions.
The oil prices slip toward the local minimum, but the data from China helped quotations rebound. Prices are now struggling to stay in the local resistance zones. The major trend is ascending, while the current correction, if not soon ended, may lead to a deeper rectification.
