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Sterling soars to 7 month highs as Boris gathers election momentum

4th December 2019 Market Update

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🇬🇧 GBP –  The British pound is now trading at its highest level since early May off the back of election rumours. Boris Johnson is on course to win a majority of 68 in parliament according to YouGov, which accurately predicted former prime minister Theresa May’s loss of her majority in a 2017 election. The opinion poll pushed sterling to its highest level against the euro since May 6, despite Jeremy Corbyn’s best efforts to sabotage the conservative campaign around the NHS.
The polls give hope that Johnson will be able to end more than 3 years of uncertainty over Brexit, however if Britain does leave the EU on 31st January, it would still need to negotiate a trade deal with the bloc.

🇪🇺 EUR – Yesterday was very quiet data wise for Europe. The Euro gained over a weaker USD, nearly breaking the 1.11 barrier during the days trading, but dropped against a soaring UK pound closing 0.5% lower at 1.1728.
In a conference on Monday, Christine Lagarde said the European Central Bank should do more to help tackle the climate emergency, as she came under pressure from MEPs to step up action against global warming. In a strong hint that as president she would move the ECB beyond its traditional remit of controlling inflation, Lagarde said the bank would incorporate the climate threat into both its economic forecasts and in its capacity as watchdog of the financial system. The ECB, like all central banks, uses models to forecast how the eurozone economy will work. “These models need to incorporate the risk of climate change,” said Lagarde. “That’s the very least, I think, we should expect.”

🇺🇸 USD –  The dollar slumped as US President Donald Trump said that a US-China trade deal may have to wait for the 2020 election. This dampened hopes that a resolution to the ongoing trade war would be possible before the end of the year. Speaking in London, Trump told reporters: “I have no deadline, no. In some ways, I think it’s better to wait until after the election with China. But they want to make a deal now, and we’ll see whether or not the deal’s going to be right, it’s got to be right.”
The greenback also suffered off the back of a rising pound, with the GBP/USD pair hitting 1.30 for the first time since may. Otherwise it was a quiet day in the US, with no major data releases.

 

Summary:

GBP: Boris boosts sterling, as markets react well to increased hopes of a conservative majority
EUR: A quiet day in Europe which remains reactive to political advancements in the UK
USD: The ongoing trade war adds to USD woes, as GBP hits 1.30 against the greenback

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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