Pound Dives After UK Election Upset

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Britain’s pound took a battering dive on Friday, staying at its two-month lows, after Prime Minister Theresa May’s Conservative Party lost its parliamentary majority in elections, plunging the country into potential political chaos days before the start of Brexit negotiations.

Sterling fell 1.6% to $1.2748 after sliding as much as 2.5% to $1.2636 in early European trade , its weakest level since April 18.

With no clear winner emerging from Thursday’s election, Prime Minister Theresa May was fighting to hold on to her job on Friday as she faced calls to quit after her election gamble to win a stronger mandate she had sought to conduct exit talks with the rest of the European Union failed, leaving no single party with a clear claim to power just 10 days before the start of negotiations on Britain’s divorce from the European Union.

Lee, Hardman, a currency strategist in London, said the market wants more clearness now as far as who will be the next Prime Minister, what kind of form will the government take and eventually how all that feeds through into upcoming Brexit negotiations are concerned.

“In the near term the increased political uncertainty and the risk of more disorderly Brexit negotiations should enforce pound weakness.”

The surprise of a result that raised questions about how Britain will go on with its plan to leave the EU, and whether any party can form a stable government, sent the pound to eight-week lows against the dollar and its lowest levels in seven months versus the euro.

After falling sharply on an exit poll released when polls closed at 21:00 GMT, which showed Britain was set for a hung parliament, the pound had steadied a little in Asian trading. However, it fell sharply again as London traders arrived at their desks, as it became clear that no party had won a majority.

Another currency strategist in London, Viraj Patel, said that the pound’s nightmare scenario would always be the failure to have a safe political stability and the result of a hung parliament.

“Hopes that political uncertainty would decrease substantially under a more stable Conservative government…(have) been all but dashed,” said Patel.

“With the two-year Article 50 clock ticking, the passage of time is sterling-negative,” he added, referring to the formal Article 50 process by which Britain is set to leave the EU. “A working government is needed as soon as possible to avoid a further drop in the pound.”

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Euro Rallies Amid Political Worries over Several European Countries

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The European currency surged back after weakening against the dollar earlier amid political worries over Greece, Italy and Britain as European geopolitical fears weakened risk appetite.

EUR/USD was up 0.20% to $1.1186 by 10:29 ET, after falling as low as 1.1108.

The single currency came under pressure in early trade as worries over Greece’s bailout, the prospect of an early Italian general election and European Central Bank President Mario Draghi’s comments about the need for continued stimulus all weighed.

James Woods, a global investment analyst in Sydney, attributed most of the currency’s decline on Tuesday, saying Athens may opt out of its next bailout payment if creditors cannot get a debt relief deal done.

“The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro zone,” Woods said.

However, he warned against reading “too much into it” without more details or confirmation, adding it was doubtful Greece would forgo the bailout payment at this stage.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week, but did come close enough to intend to do both at their June meeting.

Comments by former Italian Prime Minister Matteo Renzi on Sunday in favor of holding an election at the same time as Germany’s in September also raised uncertainty and pulled the euro lower earlier.

So did a statement by European Central Bank President Mario Draghi reiterating the need for “substantial” stimulus given subdued inflation.

Meanwhile, sterling pushed higher, rising 0.3% to $1.2877, despite British Prime Minister Theresa May’s lead over the opposition Labor Party dropped to as low as 5-6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans,  which adds to political risk around Brexit as well.

Recent polls have indicated that Prime Minister Theresa May’s Conservative Party has less of a lead over the Labor Party than expected.

The pound was also higher against the euro, with EUR/GBP down 0.09% at 0.8703.

Moreover, the greenback index was at 97.23, off the day’s highs of 97.67 as the firmer euro weighed up.

Last week the index plumbed lows of 96.79, its weakest level since November 9 amid uncertainties over the Trump administration.

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Commodity Currencies Inch Higher As Oil Slumps

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Currencies linked to commodity or oil-linked currencies such as the Canadian dollar, New Zealand dollar, Russian ruble and the Norwegian krone inched higher as oil prices slumped.

The Canadian dollar was last trading up 0.20% at C$1.3460 per U.S. dollar, down from a five-week high of C$1.3388 touched on Thursday. New Zealand dollar surged back 0.30% to $0.7045 after slipping 0.34% earlier. The Russian ruble and the Norwegian krone rose 0.51% and 0.17% to $0.01766 and $0.1193 respectively.

Oil Prices Slumped

Battered oil prices slumped on Friday after tumbling 5% in the previous session.

On Thursday in Vienna, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to extend a deal to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018, disappointing investors who are betting on longer or larger edges.

Brent crude futures were down from their last close 1.01% to $50.94 per barrel at 8:06 AM EDT as they were still set to end Friday with a weekly loss of more than 3 percent. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures were below $50, at $48.43, slipped 47 cents and 0.96% from their last close.

Matt Simpson, a senior market analyst, wrote in a Friday note, “Oil was practically begging to be knocked off its perch after rallying into the OPEC meeting with wide expectations (for) extended cuts. As the extensions were estimated to be around nine to twelve months, OPEC needed to far exceed this time horizon for oil to sustain its rally.”

Moreover, the dollar index lost 0.12% to 97.08, some risk-off sentiment driving the yen higher, who rose to a 3-day high against the greenback 0.76% to 111.03 yen, while the euro also edged higher 0.13% to $1.1225.

Meanwhile, Sterling fell over half a percent to as low as $1.2870, a two-week low on Friday, pulling further away from a May 18 peak of $1.3048, its strongest level since September last year, after a poll showed a narrowing lead for British Prime Minister Theresa May over her opposition prior to elections next month.

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Pound Sags After Deadly Manchester Explosion

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Sterling slipped on Tuesday after a suspected suicide attack killed at least 22 people and wounded 59 at a pop concert in the English city of Manchester.

Sterling eased 0.1 percent to $1.298, extending Monday’s 0.3 percent loss. The pound dropped 0.3 percent to 144.34 yen, after losing 0.2 percent on Monday.

The attack came up just two-and-a-half weeks before an election that Prime Minister Theresa May is expected to win easily, though polls showing that the contest was tightening put the sterling under pressure.

At least 22 people were murdered in a suicide bombing at a pop concert by U.S. singer Ariana Grande along with children in the northern English city of Manchester. Fifty-nine (59) others were injured in the attack carried out by a suicide bomber, who died after detonating an improvised explosive device.

If the attack on the concert is confirmed as a terrorist attack, this would be the worst and deadliest attack in Britain by militants since four British Muslims killed 52 people in suicide bombings on London’s transport system in July 2005.

“This has been the most horrific incident we have had to face in Greater Manchester and one that we all hoped we would never see.” said Hopkins. “We have been treating this as a terrorist incident and we believe, at this stage, the attack last night was conducted by one man. The priority is to establish whether he was acting alone or as part of a network.”

Euro At Six-Month High

The euro hit a six-month high overnight after German Chancellor Angela Merkel said it was “too weak” due to the ECB’s monetary policy, pointing out that this helped explain Germany’s relatively high trade surplus.

The common currency jumped 0.1 percent to $1.1249 after jumping as much as 0.5 percent and closing 0.3 percent higher on Monday.

Junichi Ishikawa, a senior FX strategist in Tokyo, said that Merkel’s comments boosted the euro and so the weakened dollar is not essentially a bad thing for Trump.

The chancellor’s comments delivered fresh momentum to the euro, which has been on a bullish footing since the French presidential elections earlier this month. Upbeat euro zone data and a widening spread between the 10-year German and U.S. government bond yields have also supported the currency.

Moreover, The safe-haven yen advanced against major peers like the dollar and euro but its gains were modest.

The dollar was barely down 0.09 percent at 111.14 yen after a dip to 110.860 but the euro rallied 0.03 percent to 125.12 yen.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, was 0.1 percent lower at 96.80.

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Bitcoin Rallies to All-Time High, Options Exchange Increases

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Bitcoin surpassed the $2,100-level for the first time to hit a fresh new high, as a monster rally continues amid upbeat noises around the future of the cryptocurrency, and as Ledger Holdings, the New York-based parent company of bitcoin options exchange LedgerX, said it raised $11.4 million in funding on Monday.

The cryptocurrency giant surged to a daily peak of $2,105.00 on the New York-based itBit exchange at one point, its highest on record. It was last at $2,100.00 by 4:10 AM ET, up about 5% on the day. Currently, Bitcoins are trading at $2,148.58 that totally puts the market cap at $35.11 billion. The total supply of Bitcoins currently sits at 16,343,288.

At the end of April, Bitcoin was trading for about $1,300 per coin. In just three weeks, the valuation has climbed by about 50%, as Bitcoin surpassed the $2,000 mark this week. About 12% of that significant gain was in the past week alone.

Since the start of the year, the price of bitcoin has soared 116%, taking the total value of the cryptocurrency in flow to more than $37.5 billion.

Bitcoin first broke the $1,000 barrier in November 2013 but slipped significantly shortly after. It wasn’t until early this year that its value returned to the $1,000 range.

Meanwhile, the parent company of bitcoin options exchange operator LedgerX closed $11.4 million in funding led by  Miami International Holdings Inc and Huiyin Blockchain Venture Investments that supports LedgerX’s plan to operate a regulated exchange and clearing house for bitcoin and other digital currencies.

LedgerX is awaiting regulatory approval from the Commodity Futures Trading Commission to operate the first U.S. regulated exchange and clearing house for bitcoin options. On approval, participating institutions can use the LedgerX platform to obtain and hedge bitcoin using exchange-traded and centrally cleared options contracts.

“In the short term, these investments will further our application to become a regulated exchange and clearing house for bitcoin options,” Paul Chou, chief executive officer of LedgerX LLC, said in a statement.

“In the long term, these strategic investors will help us enter additional marketplaces and territories,” he added.

Bitcoin, a virtual currency that can be moved like money around the world quickly and anonymously without the need for a central authority, can be used to purchase goods and services from stores and online retailers.

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South Korean Won Down Amid U.S. Political Turmoil

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The South Korean won slipped for a third consecutive session to drop by more than a one-week low early on Friday as mounting uncertainty about Donald Trump’s presidency powered risk-aversion among investors in developing markets like South Korea.

The won was down at 1,126.9 against the US dollar as of 02:35 GMT, down 0.2 percent compared with Thursday’s close of 1,124.5. It had moved down as low as 1,131.1 as soon as the market opened.

A sharp acceleration in US factory activity gave the US dollar a lift on international exchanges, putting extra pressure on the won.

“It is true that the greenback itself strengthened in the global market, but the won seems to be losing more than expected due to strong risk-off mood in Asia region,” said Ha Keon-Hyeong, a Korean foreign exchange analyst.

He expected US dollar strength to continue in coming week, but saw won trading in a narrow range as end-month dollar-selling from local exporters will support the South Korean currency.

Meanwhile, Trump flatly denied he asked the Federal Bureau of Investigation to end a probe into possible collusion between his campaign team and Russia, but talked over the possibility that he could be impeached has made some investors in emerging markets look for safer havens.

U.S. President Donald Trump’s sacking of Comey last week set off a political firestorm after the latter had written a memo stating that Trump had asked him to drop a probe into his former national security advisor’s Russian connections.

Moreover, South Korean shares also edged up, with the Korea Composite Stock Price Index (KOSPI) barely closing up 0.07 percent at 2,288.48 as of 6:03 PM GMT.

Foreign investors turned to net buyers right before the closing bell, purchasing 23.9 billion won worth of KOSPI shares for the day.

Offshore investors had purchased 63.2 billion Korean won (S$78.11 million) worth of Kospi shares near mid-session.

Hyundai Motor Co. publicly denied a media report that it is seeking to introduce a holding company structure, though investors still made expectations. The company shares rose over 3 percent at 170,000 won while market heavyweight Samsung Electronics dropped 2.6 percent at 2,236,000 won.

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Yen Falls against Dollar amid Cyber Attack, North Korea Test

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The safe haven yen fell against the U.S. dollar, who bounced back from its early losses, on Monday, ignoring another missile test by North Korea on Sunday and threats from a cyber attack that spread around the globe at the weekend.

USD/JPY was up 0.09% to 113.48 by 06.38 EDT, after dropping down to overnight lows of 113.17.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, pulled back a little  0.26% at 98.79. Weak U.S. data Friday dampened the outlook for the pace of further U.S. tightening this year.

The yen went higher overnight after North Korea confirmed that it had carried out a mid-to-long range missile test on Sunday.

The test was a significant advance in North Korea’s drive for an intercontinental ballistic missile capable of carrying a nuclear warhead and reaching the U.S. mainland.

North Korea’s statement over the weekend that its latest missile test can carry a large nuclear warhead worried investors at the start of a new trading week and provided a minor increase to the Japanese Yen’s safe-haven appeal. Investors were also cautious amid fears that a weekend cyberattack that hit businesses, hospitals and government agencies in at least 150 countries around the world is probably rising.

The dollar had declined last Friday after data showing that U.S. retail sales grew less than expected last month and core inflation dropped raised concerns over the economic viewpoint.

Ahead, China reports fixed asset investment with a 9.1% gain seen for April year-on-year, industrial production with a 7.1% rise seen and retail sales with an increase of 10.6% expected.

Later this week, the U.S. will report on building permits, housing starts, industrial production and jobless claims for fresh indications on the strength of the economy. Japan is to report on first quarter growth and the UK is to produce what will be carefully watched data on inflation, employment and retail sales amid signs that the headwinds from Brexit are rising.

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