UK Elections Underway

One of the most difficult United Kingdom elections to predict in recent memory is creating a tense situation for the Pound as market participants await the results. The increasingly fragmented nature of the UK parliamentary system means that cobbling together a coalition will be challenging for the winning party. The race between the Conservatives and Labour is exceedingly close, with neither side harboring a clear advantage. What will be relevant are the results of smaller parties including the UK Independence Party (UKIP) which has a more nationalistic approach, denouncing the European Union and intent on leaving what it has determined is a broken system. Also noteworthy is the Scottish National Party, harnessing momentum from the most recent referendum to boost the voice of the region as it seeks to extend its influence in national politics. EURGBP is trading substantially stronger ahead of the results, with the Pound down -0.36% versus the Euro since the overnight session.

Although far from having completely recovered, German factory orders released this morning managed to bounce back after contracting for two straight months. Orders grew 0.90% versus the -0.90% contraction recorded in April as a weaker Euro helps to boost export competitiveness. However, looming risks to the outlook remain, especially with Greek negotiations going into the 11^th hour. Without a deal reached between Greece and creditors by Monday, there will be no bailout tranche unlocked for Greece to meet its EUR 774 million repayment next Tuesday. Greek officials speaking on the condition of anonymity highlighted the fractious relationship between the IMF and European Commission as far as terms and objectives for future Greek bailouts. Although the DAX strengthened yesterday after collapsing in the prior session, other regional benchmarks remained weak, with the French CAC 40 falling -0.87% as stocks give up all quantitative easing gains.