As usual, nothing is ever simple in the world of politics; The UK general election on Thursday resulted in a hung parliament. The pound fell around 2% against most major currencies- and for those of you who read my previous article - would have been prepared for this!
So what happens next? Theresa May has to form a government as quickly as possible, it seems that the Tories will be forming a government with the DUP (Democratic Unionist Party). Now, time for an honest moment...I had never heard of them before, and it seems I wasn't not the only person. Once both parties have confirmed they will be working together then the PM can start getting to work - as Brexit negotiations will begin on the 19th June.
On the sidelines, it does seem that the Conservative party are unhappy with Theresa May's leadership and many want her to resign, there are also rumours of Boris Johnson wanting to make a play for the leadership - though he has denied this. Jeremy Corbyn has also stated that he will set out his own programme as an amendment to the Queen's speech as he still has a chance to become Prime Minister. Either way, we will find out on Monday how thing's turn out - as far as the pound is concerned, the sooner we have political stability, the better.
Now back to regular scheduled programming, there is plenty of economic data out this week that has the potential to start moving the markets.
Tuesday - UK inflation data (CPI) - This is expected lower than last month, as rising inflation has become a problem in the UK, I do not necessarily see this as a bad thing.
Wednesday - UK jobless claims and average earnings - All of this data is expected on par, if we do see a higher or lower number then I expect the markets will move.
Wednesday - U.S Fed interest rate decision- It is expected that the US will do an interest rate hike this week by 0.25%- as a result, the expectation is that the US dollar will strengthen.
Thursday - UK Bank of England interest rate decision- We are expecting rates to be left on hold, however Governor Carney's speech could be interesting depending on if we have a government by then or not, I think he will seek to add stability into the markets and his forward guidance could help us with next steps for the pound.
Friday - Eurozone inflation data (CPI)- We are expecting Europe's inflation to have contracted and the monthly figure to be in the negative region, this could assist GBPEUR exchange rates in going up.
We are in interesting times at the moment, and of course, Brexit negotiations will begin to add to the volatility currently in the markets.