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The Indian election provided a shock that weighed on the rupee yesterday.
Currency markets were relatively unmoved yesterday, with any moves swiftly cancelled out by minor corrections. That came in the absence of much market-moving data, but the drifting undercurrent of risk served to sharpen minds for challenges ahead.
GBP/USD had briefly touched its highest level since mid-March in the morning session. Sterling would ultimately fall back and move little against the euro. EUR/USD meanwhile lost a touch of value but had almost recovered by the end of the European session.
Tuesday’s key piece of macro data showed that US JOLTs job openings fell by almost 300,000 between March and April. April’s figure of just over 8mn was the lowest number in over two years and several hundred thousand shy of expert forecasts.
German unemployment rose to 2.76mn in May, the highest level since March 2021 and the latest in a streak of rises in joblessness. The news was all the more significant given the European Central Bank (ECB) are set to make their next interest rate decision on Thursday.
There was a huge shock from India yesterday. Narendra Modi could only sit and watch as his projected majority, which had been reported as recently as yesterday afternoon by vast swathes of the world’s media, slowly melted away. In response, the Indian rupee tumbled against almost every one of its peers, loosing 0.5% to the pound, US dollar and euro and over 1% against the Japanese yen.
The rupee’s malaise provides a stark warning for those of us with a vested interest in sterling. Should there be a surprise outcome, or indeed should uncertainty increase between now and 4 July, the country should brace itself for a period of unpredictable currency movements, which could prove disastrous for anyone with an upcoming international transaction.
The leaders of the Labour and Conservative parties squared off in a televised debate last night. It was a tetchy affair marked by personal barbs and few illuminating moments. According to a snap YouGov poll conducted immediately after the broadcast, the sampled viewers thought the Prime Minster just about shaded the contest. 51% thought he had won the debate versus 49% who thought Starmer came out on top.
The standard of debate was not always elevated, a notion new Reform UK leader Nigel Farage will no doubt echo. Farage had a drink thrown over him yesterday while attending an event in his target seat of Clacton.
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GBP: Heed the warning
Sterling might not need any warnings of the devastating impact elections can have. After all, several of the UK’s most recent elections have prompted huge volatility for its currency. However, the fate of the Indian Rupee should provide a wake up call for those in any doubt about the potential for disaster.
GBP/USD: the past year
EUR: The final straight
Decision time is approaching for the ECB, but that will come after the last set of key data from the bloc. Final HCOB reads for key jurisdictions arrive this morning, which could provide a late change of thinking for policymakers.
GBP/EUR: the past year
USD: Dollar feels the pinch
The US dollar has been weighed down by recent data, a trend that continued yesterday with JOLTs job openings. The dollar’s fall has hardly been precipitous, but markets have found it increasingly difficult to justify their existing positions.
EUR/USD: the past year
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