Labour Leader Jeremy Corbyn announced yesterday that his party would back an early election, as the EU has confirmed an extension of Article 50 to 31st January, and therefore its main condition of taking a no deal Brexit scenario out of the question had been met. He said yesterday that the Labour party would ‘now launch the most ambitious and radical election campaign for real change our country has ever seen’.
MP’s voted yesterday evening in favour of holding an election on 12th December, with 438 votes for vs 20 votes against, making a huge majority of 418. An earlier vote proposed by the Labour Party to bring this date forward to 9th December (so as to include students living at their term time addresses) was rejected by 315 votes to 295, and MP’s did not vote on lowering the voting age to 16 or allowing EU citizens to take part in voting in the election, as had been considered.
The 12th December election will need to be passed by the House of Lords; however, this could become law by the end of this week. If this is passed the 5-week election campaigns leading to polling day will begin on Monday, with the result potentially being announced in the early hours of Friday 13th December.
Elections have historically caused considerable volatility for the currency in question. Considering this election could be the most unpredictable in the history of politics, we could see significant swings on Sterling exchange rates over the course of the next 5 weeks.
The Bank of Canada will release its latest interest rate decision today at 3pm, where it is expected to keep rates on hold at 1.75%. However later this evening the Federal Reserve are expected to cut Interest rates from 2% to 1.75%. According to the Financial Times, there is a 95% chance of a 25-basis point cut. This is despite the US economy being in a strong position, with unemployment remaining at a 5-year low, and little inflationary pressure. The Federal Reserve cut interest rates back in July and September, however the FED have suggested that a further cut would prevent the global slowdown in manufacturing and trade from impacting US consumers.
The Federal Open Market Committee press conference will follow this and could provide some hints to the future direction of monetary policy. We could see volatility for Canadian Dollar and US Dollar exchange rates following these announcements if these are released outside of expectation.
The Pound remains close to the best levels seen since June 2016 against the Australian Dollar, and Strategists at Westpac have upgraded their forecasts for GBP/AUD Interbank exchange rates which could see rates breaking through the 1.90 levels not seen since before the Referendum. The chances of a no deal Brexit have reduced after MP’s passed the bill for an early election set for 12th December, subject to House of Lords approval this week, which prompted this upgrade in forecasts.
The Reserve Bank of Australia Governor, Philip Lowe, spoke yesterday to confirm that the central bank would be prepared to cut interest rates further if needed. In a speech in Canberra, he reiterated that recent interest rate cuts have already shown signs of improving economic growth. This year the RBA have cut rates from 1.5% to 0.75%, and its next interest rate decision meeting will take place next week on Tuesday 5th November.
Inflation data in the form of Consumer Price Index was released overnight last night and showed a slight improvement from 1.6% to 1.7%. This improvement could mean that the RBA are likely hold off cutting interest rates at next week’s meeting, as before this Inflation release the chances of a cut was at just 14%. It will however still be in focus for any signs of future monetary policy changes, or in case of any surprises from the central bank.
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