'Triple-threat Thursday' gives traders pause

A "triple-threat" of big geopolitical events today could prompt major swings on markets and in particular for global benchmark currencies, say analysts.

So what are these threats and could they really happen?

UK Election

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The UK goes to the polls today in what has become one of the most divisive and personal elections in 30 years - and with Brexit talks looming, traders are keenly awaiting the outcome.

In general, it is assumed the City wants Theresa May to win a larger mandate because it will give her freedom to negotiate a deal with the EU without being tied to the hard Brexit instincts of some of her backbenchers.

Bloomberg cites five predictions on the outcome, including a majority of more than 100 seats for the Tories, which Royal Bank of Canada's Adam Cole says is already "priced in" by traders.

The suggestion seems to be that a bigger majority and upwards of 50 seats will either be neutral or positive for the pound, while a tighter result could be negative.

According to The Guardian, an increased majority could send the pound back above $1.30, while the hung parliament predicted by YouGov could drag it four per cent lower to $1.24.

As for stock markets, expect the FTSE 100 to move the other way: most of its members earn a majority of income overseas, so they benefit from a weak pound.

In the early hours of voting today, the pound was up to close to $1.30 against the dollar.

The European Central Bank

The European Central Bank meets today - the first of three big summits taking place - and will publish publication its policy update at around 12.45pm.

It had been expected that the central bank would signal a more hawkish note this morning, not least after strong first-quarter growth figures, which were upgraded this morning.

But, CNBC says, the inside track now is that "inflation forecasts for the next three years [will have been] cut to 1.5 per cent, from 1.7 per cent, 1.6 per cent and 1.7 per cent, respectively".

As inflation is closely tied into interest-rate policy, this could thwart any hopes the report will signal a shift towards tighter policy. No actual move was expected this month in any case.

In short, that means interest rates lower for longer, something which led the euro lower against the dollar first thing this morning. This remains near six-month highs following a strong recent run, but "is poised to disappoint if [ECB President Mario] Draghi sticks to the script".

The testimony of James Comey

Lastly, from about 3pm this afternoon, former FBI chief James Comey will testify to the Senate intelligence committee in the US.

His prepared remarks have been published in advance and contain no major surprises, but "investors will want to see if any damaging revelations emerge during questioning that could stoke controversy for the Trump administration", says the Financial Times.

Revelations about Donald Trump's contact with Russian officials during last year's election campaign have prompted impeachment rumour and bringing down the whole administration would prompt chaos, hitting the dollar and stocks hard and boosting gold.

However, this is seen as unlikely. Instead, the FT warns that the growing crisis could "potentially hobble the White House’s mooted pro-growth agenda". That is weighing on the dollar.

But at "just a few ticks shy of its November 9 lows, the dollar index looks poised for a rebound if Comey plays the 'good soldier' role and spares his former boss further embarrassment", says The Street.