Dollar index hit a new low

22 May, 2017

The dollar index hit a new post presidential election low of 96.95 on Friday May 19th. EUR/USD hit a high of 1.1211 a level not seen since November 9th of last year. On Monday morning, during the European session, the dollar index experienced a moderate rebound, touching 97.29, as the market is aware of a strong support level at 97.00.

GBP/USD hit a high of 1.3047 on May 18, last seen September 29, breaking a significant resistance at 1.3000. On Monday morning, during the early European session, GBP/USD saw a retracement falling below 1.3000 as a result of the dollar rebound. GBP/USD has rallied 3.75% since Theresa May announced a snap general election. Consensus about GBP has turned to bullish from bearish with many shorts being closed out as Cable has rallied higher.

The UK general election will be held on June 8th – less than 3 weeks away. Per recent polls (conducted by Business Insider and GFK) 48% of Brits will vote for the Conservative Party, seeing an increase of 7% comparing to the previous polls, 28% will vote for the Labour Party, in line with the previous polls. Per polls conducted by the tabloid newspaper The Daily Mail on May 20th, the approval rating for the Conservative Party is 46% whereas with Labour it is 34%.

The Brexit negotiation is one of the focuses of the election, the Conservative Party has pledged a smooth and orderly Brexit. To attract Labour party voters the Conservatives changed their policies; focusing more on the needs of workers and middle classes, enhancing NHS’ financial conditions (by reducing free services offered to wealthy elders) and controlling the number of immigrants into the UK.

These new policies are expected to help the Conservative Party to obtain 56 seats from other parties, especially from UKIP. Per recent polls, the Conservative Party is expected to win a landslide victory in the election. Polls forecast the Conservative Party will win 390 seats, out of the 650 seats in the Parliament, becoming the outright majority with a 130 seats lead.

On May 20th it was reported that Theresa May plans to cancel school free lunches as it is not necessary for those families which can afford it, taking government spending reallocation into consideration. The announcement caused a slide in approval rating for the Conservative Party. Per the latest polls conducted by YouGov, the difference of approval rating between the Conservative and the Labour now narrows to 9% (the approval rating for the Conservatives dropped to 44%, whereas with the Labour it increased to 35%). Regardless of this fall the Conservative Party is still expected to win the General Election.

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