THE BRITISH POUND FALLS TO A SIX WEEK LOW AS THE CONSERVATIVE PARTY FAILS TO GAIN A MAJORITY VOTE IN THE GENERAL ELECTION
The British pound fell to a 6 week trading low after the UK elections resulted in a hung parliament, with no one party gaining an outright majority victory. The British plummeted towards 1.2635 against the US Dollar on the London open, after previously trading at 1.2878 the day before.
Current British Prime Minister Theresa May faced calls to step down as the Conservative party leader, as her decision to call a UK election proved to be a major error on her behalf. The official result showed the Conservative Party gained 318 seats, with the Labour Party, led by Jeremy Corbyn gaining 216 seats, leaving the Conservative Party short of the 326 seats needed for an overall majority victory.
Theresa May later struck a deal with Northern Ireland's Democratic Unionist Party (DUP) which will enable the Conservative Party to form a government. The Conservatives coalition with the Democratic Unionist Party helped the party reach the 326 votes needed to form a majority government, as the DUP party had earlier won 10 seats.
It still remains unclear whether the deal will be a formal coalition or a looser "confidence and supply" arrangement. The former would give the DUP a degree of control in government, while the latter would see the party support the Conservatives' policies in return for some of its policies being enacted.
The election result has added to uncertainty ahead of the Brexit negotiations, which are being held in just 10 days time. It has also significantly raised the chances of the UK leaving the European Union without securing a deal.
At present, it remains uncertain whether Theresa May will be leading the United Kingdom in negotiations, as opposing parties call for her to step down, with reports citing Boris Johnson as the favorite to replace Theresa May as British Prime Minister.
The European Central Bank this week met in Tallinn, Estonia, and increased their forecasts for economic growth in the eurozone, but kept interest rates on hold.
ECB President Mario Draghi also hinted that there was no need to cut rates further, speaking at the ECB conference, the ECB head told reporters "We are now confident that inflation will converge with our objectives."
Mario Draghi said: "The risks surrounding the euro area growth outlook are considered to be broadly balanced". This was a marked change from his comments in April, which described the risks to growth as "tilted to the downside". Crucially, the ECB downgraded its outlook for inflation to 1.5% in 2017, from 1.7%. It also revised its inflation outlook for the following years to 1.3% in 2018, and 1.6% in 2019.
The euro currency reacted negatively to Mario Draghi's policy June policy statement, briefly slipping under the 1.1200 level, after previously trading at a new high 2017 high at 1.1284.
Traders had previously expected that the ECB President would give a clear indication to financial markets that the European Central Bank, would now start to taper down the current QE programme in place, as the eurozone economy begins to recover, with economic data particularly strong in the past few months.
Former FBI Director James Comey testified to the senate, and accused President Donald Trump of firing him, to undermine the CIA's investigation into possible collusion between Russia and 2016 Trump election campaign.
During more than two hours of testimony, the former FBI director told the Senate Intelligence Committee he believed Trump had directed him in February, to drop an FBI probe into the Republican president's former national security adviser, Michael Flynn, as part of the broader Russia investigation.
Financial markets reaction to the testimony remained mixed, US stocks largely unchanged, with the US dollar index initially falling on headlines coming from the testimony, but later recovering, to end the week higher at 97.33.