Despite Sterling’s recent gains over the last few months against most major currencies, uncertainty remains over the short-term strength of the GBP in the build up to the nation’s general election on December 12th.
According to a recent poll published by The Financial Times, the Conservative Party currently leads a majority with 38%, followed by the Labour party at 27%.
A recent survey also published by research group ICM, suggested that the main parties were seemingly losing ground as a result of the frictions displayed in parliament over Brexit. The report also showed that 11 per cent of those who voted Conservative at the 2017 election were now planning to vote for the Brexit Party, while 12 per cent of those who backed Labour in 2017 intended to vote for the Liberal Democrats.
Questions ultimately remain whether the upcoming election will be able to beak the current Brexit deadlock and with volatility expected in the build up to the election date, Sterling currency markets could be affected as a result.
Tomorrow, the latest interest rate decision from the Bank of England will be released in addition to their quarterly inflation report. With current expectations suggesting no change to the current interest level of 0.75%, comments from the central bank’s governor Mark Carney in the subsequent speech following the releases, could influence sentiment in the GBP.
Concerns remain over the state of the Eurozone manufacturing, as October witnessed the ninth consecutive contraction for the sector. Despite the better than anticipated results shown from the latest figures on Monday, analysts are still showing signs of pessimism for short term improvements.
The latest PMI figure for the Bloc’s manufacturing sector showed there had been little recovery from September’s figure of 45.7. According to Commerzbank’s Senior Economist Peter Dixon, the sector is still in recession and will continue to be burdened by the on-going trade disputes between the US and China.
Further Markit index data for the Bloc’s services sector and Retails Sales data is set to be released today, the outcome of which could affect sentiment in the single currency. Current expectations suggest that there will be no change to the current services PMI figure of 51.8. Retail sales for the Eurozone could see an increase of 0.4% from this time last year, whist there could be a drop off of 0.2% from last September.
The ongoing trade disputes between the United States and China has put pressure on international trade and financial markets. According to recent reports, the disputes between the world’s two largest economies could take a positive turn this month, after almost 2 years of negotiations. The two nations are planning to sign a “Phase One” trade deal that would reduce the tariffs on a number of electronic goods, including computer components and consoles, with a number of reports suggesting this is set to benefit Chinese tech giant, Huawei.
It is yet unclear whether this potential agreement will quell the political and economic tensions between the two nations, however the US President is reportedly confident the deal will be signed and will take place on US soil.
Tomorrow, the Federal Reserve will release figures for the latest Jobless data and on Friday a consumer sentiment index from the University of Michigan will be released, which is highly regarded as an indicator of consumer spending. Jobless claims for November are currently expected to see a slight decline from the previous figure of 218k, whilst the consumer sentiment index at the end of the week is expected to show no change. This being said, if the figure comes in better than expected the USD could consequently benefit, as sentiment in the currency could increase accordingly.
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