Sterling pushes to new multi-year highs

6th December 2019 Market Update

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?? GBP -  Sterling had a very strong day yesterday and is this week’s best performer of major currencies having risen by around 2% versus the US Dollar over the last few days. This is on the back of growing confidence that the upcoming General Election will return the Conservative Party to Westminster with a healthy majority. This will remove the near-term uncertainty that a hung Parliament would create which the market clearly dislikes. Sterling yesterday reached its highest level against the Euro for two and a half years.
Today is empty for the UK on the economic calendar which means that market focus will be solely on the latest General Election polls. It’s not clear how long and how far the Sterling rally will continue until the market feels that a Conservative majority is priced in. The latest head-to-head debate between Johnson and Corbyn airs tonight and may be the last chance for Labour to change the course of the election.

?? EUR - The Euro suffered heavy losses against the Pound yesterday but fared much better in gaining ground versus the US Dollar. This was despite Retail Sales data for October slipping well below expectations and Gross Domestic Product showing no signs of an uptick.
There are no economic releases for the single bloc today and so it is likely that the Euro will have a quiet end to the week.

?? USD -  Following successive poor data from the US economy, the Dollar fell for the fifth consecutive session yesterday. Analysts have suggested that the Fed may need to continue its interest rate cutting cycle if the data remains disappointing rather than hold any further action which had been signalled at the last FOMC meeting.
Non Farm Payroll figures will be released today at 13:30 which will be the key event for volatility today. Expectations are for a much improved result compared to the last reading which may help the US Dollar but there is a feeling that markets will want to see improving manufacturing figures before moving back into the Dollar. In the short term, US Dollar weakness looks set to continue.

 

Summary:

GBP: Election fever is gripping the Pound pushing it higher
EUR: Quiet end to the week but strengthening against US Dollar
USD: Poor economic data is hurting the Greenback

 

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