The pound has found itself trading at the top end of its recent ranges against the euro, US dollar and most major currencies, with focus firmly on the December 12th general election.

The Conservatives currently hold an advantage in the polls against the Labour Party and Tuesday night’s debate on ITV failed to move the polls significantly with both Boris Johnson and Jeremy Corbyn being heckled at points. According to YouGov polling, Mr Johnson won the debate by 51% to 49%, virtually nothing separating them which will suit Mr Johnson.

There is a clear correlation between sterling strength and the odds of a Conservative majority, therefore the pounds value will depend on how Mr Johnson performs in the upcoming debates, which is an important issue for clients looking to change GBP to consider. If the Conservatives win a majority, the markets will believe in a swift ratification of the EU-UK Brexit deal and quash uncertainty hanging over the UK economy.

UK Covid Cases Rise

According to Betfair the odds of a Conservative majority currently sit at 65.8%, these odds should ultimately keep the pound supported for the time being until the next debate. The question is, how much have the markets factored in a Conservative majority and how much potential does the pound have to rise significantly? Any closing of the gap by the Labour Party will likely trigger a downside slide of the pound as a correction will take place. Let’s not forget the election in 2017 when Labour performed very well in the live debates and almost closed an even bigger gap against the Conservatives, will history repeat itself?

The pound could rally today as the Conservative Party and Brexit Party are in talks to work together to ensure the leave vote is not split in the General Election. If they work together, we could see a rise in the pound as a Conservative majority would become more likely.

Conservatives will put up “paper candidates” in Labour held constituencies where the Brexit Party have a chance of winning and vice versa. Farage has yet to publicly agree to this deal, however there could be an 11th hour deal!

Morgan Stanley believe the pound will strengthen over the coming months "The pound should rally sharply by 1Q 2020 as an orderly Brexit path becomes clearer, prompting foreigners to lift their GBP hedges and invest in undervalued GBP assets,".

If you have any questions about how the impending debates and election could affect your currency transfer, get in contact today.

Eurozone Economic Improvements Support the Euro

Brexit has been dominating the news and affecting the euro as a result. However, Morgan Stanley have stated they expect the euro to perform well due to an expected improvement in the Eurozone economic growth.

Has the bottom been hit in the Eurozone economy and is a turnaround imminent? According to currency analyst Fritz Louw at MUFG - "Recent leading indicators have provided tentative signs of optimism that the German economy is close to the worst point and could begin to pick up gradually in 2020... the improving euro-zone data flow has not been sufficient to encourage a stronger euro at the current juncture,".

In 2019, the Eurozone growth has been static, largely due to the German manufacturing slowdown which has suffered from the Brexit uncertainty, slowdown in Chinese economic activity and global trade tensions.

GBP/USD trading reaches record highs

US China Trade Deal in Doubt

China has been warned by Lawmakers in the US not to use violence against the Hong Kong protesters after voting on Tuesday to unanimously advance the Hong Kong Human Rights and Democracy Act. China has already stated it would take “strong countermeasures” to this bill as the first round of “phase one” trade deals is occurring. Tensions are rising in Hong Kong as the US-China trade negotiations are faltering.

Trump’s language regarding the trade deal has gone from being “very substantial” to “could be reached” in a matter of weeks. This slowdown in trade talks has the potential to affect many currencies as global tensions could rise. President Trump told The Economic Club of New York late Tuesday that "a significant phase one trade deal with China could happen" but then threatened that "If we don’t make a deal, we’re going to substantially raise those tariffs. They’re going to be raised very substantially."

If you have the requirement to purchase or sell USD, get in contact with a currency specialist who will keep you up to date with market movements.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.