IFX Market Report: Friday 7th May 2021

Sterling was cautious on Thursday as Brit’s headed to the polls for Local elections. The Prime Minister encouraged the public to “get out and vote, folks!” after casting his vote at his local Westminster polling station. In England, there were 143 councils and 13 local mayoralties in play, while voters in Hartlepool chose a new MP. In Scotland, all 129 seats in the Holyrood parliament are up for grabs, while Wales is also electing a new parliament. Results for English councils are expected to be announced through to Friday, with the outcome in Scotland and Wales not expected to be clear until the weekend. Following these results, Westminster MPs will return to the Commons next week for the Queen’s speech, in which she will set out the UK government’s priorities for the coming months.

GBPUSD traded hesitantly during the morning session but showed signs of enthusiasm leading up to the latest Bank of England meeting, which took place after the London close. Cable opened the day at 1.3906 and closed at 1.3890.

GBPEUR also made moves to the downside on Thursday. The pair opened at 1.1580 and closed at 1.1519.

EURUSD in contrast was able to make decent gains on Tuesday, finishing over 50 pips from where it opened. The pair opened at 1.2008 and closed at 1.2059.

At the latest policy decision, the BoE raised its forecast for British economic growth in 2021 to 7.25% from February's estimate of 5.0%. But it comes after output plunged by 9.8% in 2020, the biggest drop in more than 300 years. While this news is obviously positive for the UK, Governor Andrew Bailey warned not to “get carried away” with the new improved outlook. He stressed that such a recovery would take “us back by the end of this year to the level of output that we had essentially at the end of 2019 pre-COVID”.

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