Sterling exchange rates have climbed in the lead up to this Thursday’s historic general election, with the pound to euro rate hitting the headlines after reaching both its annual, and 31-month high (1.1913).
Thursday’s general election will be the first held during December in almost a century, and as the election campaigns enter their final stretch the Conservatives appear to be holding onto a clear victory, which is why the pound has strengthened through December.
Financial markets appear to prefer a Conservative majority, as it would allow Boris Johnson’s government to plough on with their Brexit plans and therefore reduce economic uncertainty for the UK moving forward. A Labour win on the other hand could result in further delays as the Labour Leader, Jeremy Corbyn, has indicated that he would begin to re-negotiate the existing Brexit deal and has also failed to rule out another referendum on Scottish independence.
Aaron Fronda, a financial writer for IG.com has suggested that a majority for the Conservatives could see cable (GBP/USD) hit a new 2019 high. Rates as it stands sit just below the annual high of 1.3380, so do bear in mind that some market commentators believe there could be more room for improvement in the pounds value.
Contrastingly, Fronda believes that any result other than a Conservative majority could result in downward movement towards 1.27 (GBP/USD) which implies a reduction in sterling’s value of at least 3%.
Do feel free to register your interest if you wish to be updated in the event of any major market movements this week.
Except for the bullish pound, the euro outperformed almost all major currency pairs yesterday, after being buoyed by some impressive data out of Germany yesterday morning. German data releases tend to be followed more closely than any other Eurozone constituent owing to the magnitude they carry within the trading bloc, and yesterday was a good example for this.
The ZEW Survey for December, which measures institutional economic sentiment for Germany came out better than expected yesterday which is a good sign for the economy moving forward. It will take more than this for the European Central Bank (ECB) to change its rhetoric according to reuters, but after a slowdown in the Germany economy this year the news may be appreciated by euro sellers.
The next ECB interest rate decision is released this Thursday at lunchtime, which could add to the potentially hectic end to the week for currency pairs mostly due to the UK election.
Ongoing talks between US and Chinese trade negotiators are reigning in any large market movements for US dollar exchange rates at the moment, as the next deadline for a limited trade deal approaches.
Trade negotiators have until the 15th of December to strike a deal and as it stands it’s uncertain as to whether Washington will impose any new trade tariffs if a deal isn’t in place by this deadline date.
Late on Wednesday there will be the US Fed Reserves Interest Rate Decision and no interest rate changes are expected to take place. The US jobs market will then be in focus on Thursday afternoon, so feel free to register your interest with us if you plan on making any currency exchanges involving the US dollar.
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