Sterling once again dipped below 1.17 on the interbank versus the euro ahead of the first televised debate on ITV between Boris Johnson and Jeremy Corbyn.
The pound had posted a fresh six month high on Monday afternoon following momentum from the YouGov poll released on November 16 showing that the Conservatives had increased their lead over Labour by three points.
There was little change to the interbank exchange rates for GBP against both the EUR (1.1668) and the USD (1.2933) following the TV debate, with initial responses suggesting that the party leaders were neck and neck in the polls for best performance. The snap YouGov poll found 51% of viewers believed that Johnson performed the best and the other 49% favoured Corbyn. YouGov points out that this is “So close as to be within the margin of error.”
Interestingly, Johnson was the clear winner on the ‘big issues’ within the global arena including Brexit and government spending, Corbyn however pushed in front with the emotional ‘buy-in’ on being trustworthy, the NHS, and being in touch with ordinary people. Will the UK vote with their heads or their hearts?
(The YouGov polls are generally seen as some of the most accurate in predicting outcomes on national votes. It was a YouGov poll that first reported a significant dip in support for Theresa May in the 2017 General Election campaign, and their final poll was very close to the actual vote itself.)
Eurozone construction data rose for the first time in three months at 0.7per cent in September versus a -0.8 per cent reading in August. The main growth was seen in Slovakia, Hungary and France whilst Sweden, Romania and Spain took the bottom three spots. Construction data is a key indicator for economic performance and is often believed to be the first flag in economic gains/declines.
The next main event around the single currency will be Christine Lagarde’s first speech as European Central Bank President on Friday. Since becoming ECB President at the start of November, Lagarde has not yet expressed any views on the future of monetary policy, but is expected to do so during this speech. She has a lot to manage amongst a deeply fractured governing council, divided by the recent reintroduction of quantitative easing.
Chinese state media said over the weekend that Washington and Beijing had "constructive" trade talks on a high-level phone call, adding to optimism from Friday that the two sides were making progress to end a dispute that has hit the global economy.
"There has been a general shift in expectations that there will be some sort of a 'phase one' trade deal and that is what is buoying markets now," said Jason Tuvey, senior emerging markets economist at Capital Economics in London.
Investors are now looking to major central banks for further clues on monetary policy with minutes of the US Federal Reserve's October meeting due later today.
The minutes from the Reserve Bank of Australia show that the RBA considered a further cut to interest rates more thoroughly than markets had expected. A further 0.25 per cent cut to a headline rate of 0.5% would signal perhaps the beginning of a more accommodative monetary policy stance than has been seen in Australia before.
However, the board decided upon a “wait and assess” approach leading to a dip in expectations of a cut to interest rates in December. Bill Evans, Analyst at Westpac states that, “the minutes confirm the RBA's easing bias but suggest they will hold rates in December in order to monitor incoming data. We continue to expect a cut in the cash rate to 0.50% in February.”
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