Will the pound extend its election gains next week?

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After an explosive start to the week pound fluctuations have been fairly minimal, with the currency managing to hold on to the multi-month highs achieved after Tuesday’s election announcement.

GBP/EUR began the week around €1.1790 and looks set to close it above €1.19, GBP/USD is up from $1.25 to $1.28, GBP/AUD is riding high at AU$1.70 (having started the week at AU$1.65) and GBP/NZD has recovered from NZ$1.78 to NZ$1.82.

What’s been happening?

The pound largely remained at its best levels of 2017 against all the major currencies on Thursday, with UK election expectations lending support to GBP exchange rates.

GBP/EUR was able to cling to the €1.19 level despite the euro getting a boost from a poll predicting victory for pro-EU candidate Emmanuel Macron in the upcoming French election.

Economic data had little-to-no impact on pound trading as investors fixated on the belief that June’s UK election will result in an increased majority for the Conservatives and subsequently strengthen Theresa May’s negotiating position in Brexit talks with the EU.

What’s coming up?

Although election news is likely to remain one of the main catalysts for currency movement in the days and weeks ahead, there are some entries on next week’s economic calendar worth watching out for.

Pound – If concerns about the upcoming election emerge the pound has the potential to reverse this week’s gains. Sterling may also be pressured lower if upcoming reports (including the Rightmove house price index, public finance figures, the GfK consumer confidence gauge and GDP data for the first quarter) indicate that UK economic output is easing.

Euro – The outcome of the first round of the French election will be the driving force behind shifts in the euro for much of next week. If Macron dominates proceedings the common currency could climb. However, if either Le Pen or Melenchon (the anti-EU candidates) appear to have the most support, we can expect losses for EUR exchange rates.

US dollar – There are several high-impact US releases scheduled for next week, including a consumer confidence gauge, trade balance numbers, durable goods orders figures and Q1 GDP. Any reports which reduce the odds of the Federal Reserve increasing interest rates in June could send USD lower, while data supportive of higher borrowing costs would be US dollar positive.

Other – General risk sentiment will keep the Australian, New Zealand and Canadian dollars on their toes in the days ahead, but Australian inflation numbers and a speech from an RBA official also have the potential to inspire AUD fluctuations. From New Zealand we’ve got credit card spending numbers, trade balance data and the ANZ business confidence index to focus on, while CAD shifts may follow the publication of domestic retail sales and GDP numbers.

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