Sterling exchange rates have widely been driven by polls and commentary about the potential outcome of the election in the UK in just 7 days’ time.
The currency market widely likes certainty over uncertainty, and given this, the results of this election could well have a large impact on the value of the Pound.
Last week YouGov published the results of its own estimates and suggested that the Conservatives could win the election, which pushed the Pound up in value. Earlier in the week, a different poll had suggested that it could be tight and that a hung parliament may well be a possible result. At that point, this resulted in the Pound losing some value.
Betting markets as of Friday, compiled by Investec, were:
Yesterday sterling jumped, after the latest opinion poll suggested that the UK would avoid a hung parliament in the election next week. This resulted in the pound reaching a seven-month high against the dollar and the highest against the euro since May 2017.
Michael Brown, senior analyst at Caxton, said: "As we saw in 2017, polls can sharply narrow as we approach polling day.” So there is still lots to play for in the run-up to the event.
Over three million people have registered to vote since the UK election was called, which is a significant increase from a similar period in the build up to the 2017 election. All this points towards a rather uncertain period over the coming week.
Elsewhere, this week Nato leaders meet near London. The summit marks the military alliance’s 70th birthday and was almost instantly highlighted as a strain of relationships, as the tensions mounted between members.
On Tuesday sharp exchanges took place between the US and French leaders, it was reported by the BBC. The 29-member block which “protects nearly a billion people”, said UK Prime Minister Boris Johnson who is leading the meeting, have disagreements about Turkey’s recent military action in northern Syria and the level of military spending by members.
Economic data for the UK continues this week with a focus on housing data tomorrow. FX Street predict that the data from Halifax will show a sluggish part of the economy, with contractions in the value of the housing market in the build-up to the election.
GBPEUR rates have been climbing recently, as polls suggest that the Conservatives could well win the pending election in the UK. Saying that, however, data from the other side of the Channel has also had an impact on the cost of buying euros.
Germany, the power-house of the Euro, has been balancing close to falling into a recession, as a result of a slowdown in the largest contributor to their economy, that being car manufacturing. This is a sector which has been under stress due to a change in buyers’ appetite for diesel cars, consumers remaining unsure about electric, talk of tariffs coming in from the US, a slowdown in China’s economic growth and the US-China tariffs. This has started to result in job losses in these sectors, with German carmakers Audi and Daimler each announcing 10,000 job cuts, in a sign of upheaval in the auto industry.
Saying that however, Germany’s business confidence rose for the third straight month, according to the Ifo survey, registering a business sentiment reading of 95 in November.
Later today, we have the latest updates on the overall Gross Domestic Product (GDP) figures for the Eurozone as a whole. FX Street expect this to remain unchanged with a prediction of an expansion of 1.2% for the third quarter for 2019 year-on-year. Anything different from this reading, however, could result in a movement of the euros value.
On Friday there is a host of French data released, including Trade Balance, Current Accounts and Import numbers. Generally, the demand for French manufacturing has been falling, resulting in a large trade deficit, which is creating strain in their economy. So much so that French parliamentarians are reportedly considering banning Black Friday, over concerns of overconsumption and misleading advertising.
US-China tensions are still ongoing. Recently, US President Donald Trump signed a bill that requires the US government to review annually Hong Kong’s autonomy from mainland China. This has reportedly raised tensions, as China and the US are negotiating a trade deal. It has also been further stretched, as the US House of Representatives overwhelmingly backed legislation on Tuesday that would require the Trump administration to toughen its response to China’s crackdown on its Uighur Muslim minority.
This, after a leak suggesting that there was a high level of mistreatment in camps across China’s East, where large numbers of that part of China’s society have been taken. Beijing sees this however as meddling in its internal affairs, and President Trump this week has signalled a trade deal might not happen until after US elections next November. Speaking at a Nato summit on Tuesday, President Trump said he had "no deadline" for an agreement with China.
A trade deal between the two largest economies is a large piece of news. The next round of tariffs from the US on China is due to come into effect on the 15th December, and therefore could be one to watch if you have exposure to the US Dollar.
Recently it was reported that US GDP growth in the second quarter climbed up to 2.1%, from an initial estimate of 1.9%, and faster than 2% growth in the previous quarter. This is positive news for the world’s largest economy.
Friday is a big day for the USD with large economic events being released, including unemployment figures and Non-farm Payroll. Non-farm Payroll, which presents the number of new jobs created in all non-agricultural businesses, has traditionally driven movement in the value of the USD. This is because the sample size which forecasts are made from is rather small, resulting in the actual number being far from the predicted. As a result, the market moves quickly to price in this new data, meaning there could well be a change in the USD value as we end this week.
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