Sterling experiences last minute wobble

11th December 2019 Market Update

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?? GBP -  Sterling continued to hold its recent levels during the day yesterday as the final days of campaigning take place. The Pound briefly hit a seven month high against the US Dollar in the morning before edging back slightly. This was despite the UK economy experiencing zero growth in October and posting its lowest annual growth in nearly 7 years. Sterling is solely focused on the General Election and is currently pricing in a Conservative majority. However, the Pound fell over 0.5% last night after a YouGov poll predicted only a 28 seat majority for Johnson, considerably down on the forecast of 68 by the same pollsters in November. This has led some analysts to warn that the Pound will suffer a sharp fall if a surprise hung Parliament transpires.

Today is devoid of economic data on the calendar and so analysts will be watching closely for any late swings on the final day of campaigning. Respective parties will be looking to get their key messages across to secure any remaining undecided voters. Sterling may continue to be sold off as the recent high levels of optimism surrounding a majority ebb away slightly.

?? EUR - Better than expected German economic sentiment figures helped the Euro to make gains against the US Dollar yesterday. The readings remain firmly in negative territory but it enabled the markets to see light at the end of the tunnel for the struggles faced by the Eurozone’s largest economy. Analysts do not expect the figures to significantly change the direction of the Euro-Dollar pair, however.

There are no economic releases for the Eurozone today which could hurt the single currency. Markets will move their focus on to Christine Lagarde’s first Interest Rate Decision as Head of the ECB on Thursday where the expectation is for rates to remain unchanged.

?? USD -  A similar view that the Fed will not change interest rates meant that US Dollar moves were muted on Tuesday. The lack of data from the US combined with US-China trade talks remaining up in the air meant that the Greenback was stuck in wait-and-see mode after significant losses last week.

US economic data will begin today with inflation readings for November being published at 13:30. These are mostly expected to improve slightly across the different readings which could help the US Dollar to rally during the day. At 19:00, the main event of the day will get underway as markets will be looking for hints from the Fed of the continuation of their interest rate cut cycle in 2020 after previously stating that they are not expecting further adjustments in the coming months.

Summary:

GBP: Sterling falls on eve of election following poll release
EUR: Surprise sentiment figures helps the Euro
USD: Focus on Fed Interest Rate decision tonight

 

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