It's been a manic month for the markets and expect more to come

It’s been a manic month with Prime Minister Theresa May stepping down, Europe going to the polls in the world’s second largest democratic vote and Prime Minister Narendra Modi and his BJP party emphatically sweeping the elections in the world’s largest democratic vote. The trade wars story has also continued to rile global financial markets. Starting with the UK, while the timing of the announcement of Mrs May's teary-eyed speech outside 10 Downing Street was curious, it was inevitable the embattled leader would not survive the treacherous Brexit negotiations – and it had become a matter of when and not if. The announcement on a Friday – was the 18th day of trading in May – and followed 14 consecutive days of lower closings between the US dollar and British pound. It has been a record slide for the currency which slipped from 1.3140 on May 6 to as low as 1.2605 on May 23. The more than 500 pip move (or more than 4 per cent selloff) sees the cable trading at four-month lows, and although we had a small short cover relief rally following May’s announcement, I expect to see more pain for cable long positions. Mrs May is expected to step down on June 7 and the bookmakers have already been pricing their favourites to succeed her. Expect to see small buy moves after the next prime minister is confirmed, but this would then be followed by pound weakness. Regardless of who follows in Mrs May’s footsteps, Brexit uncertainty will remain rife and delivering a deal becomes more and more of a unlikely hood, which amps up the Hard Brexit fears. The cable should hold above 1.26 levels in the lead up to the announcement of the new prime minster after which point the pound could test as high as 1.28 levels against the greenback. For the medium term, I maintain my negative pound sentiments – and a clear daily closing below 1.26 could expose 1.2475. Continue to watch for the weekly Commodity Futures Trading Commission trader’s report to gauge how speculative pound positioning changes in the market. After a short spell in April, where net exposures were actually long on the pound, the trend has now reversed for net short positions to start building to their highest levels since mid-March. And these figures were published before Mrs May announced her resignation. Her announcement came a day before Europe went to the polls to elect the European parliament for the next five years. While all eyes were on how the populist factions would fare, the event turned out to be the complete opposite, a non-event. While there were improvements in the turnouts for Nigel Farage's Brexit Party, the anti-EU movement was in the shadow of the EPP and S&D retaining their majority. In my last column , I maintained upward resistance for the euro/US dollar coming in at 1.1250 which still holds true at this point in time. Downward support for EUR/USD will come in at 1.11 levels in the short term, a break below such levels is seemingly unlikely in my opinion. The data docket picks up in the first week of June; watch closely for the release of European inflation due out on June 4 (expected at 1.4 per cent, down from the previous 1.7 per cent) followed by the overall gross domestic product print (year-on-year figures are expected unchanged at 1.2 per cent) followed by the heading European Central Bank rate decision later that evening. I expect a more than hawkish ECB which should see pressure piling on the euro following the press conference. We are also continuing to keep tabs on the ongoing trade wars theme. With Huawei under target from the US government, it will be interesting to see how China retaliates here. Expect the US dollar to remain buoyant around current levels. The dollar has remained under my 98 target given earlier this month, so expect to see consolidation continue under these levels through the start of June. Finally, gold hit as low as 1269, completing my target given earlier this month. I maintain the same bearish views on gold with short positions to be triggered only above 1320 levels. Expect to see good buying support in the channel between 1268 and 1275 going forward. Gaurav Kashyap is a market strategist at Equiti Global Markets. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti

It's been a manic month for the markets and expect more to come

Theresa May's resignation, Europe and India heading to the polls and the trade war have kept investors on their toes