Today marks the previous deadline set for the UK to leave the European Union and current stalemates in parliament have stalled any further Brexit developments. The main topic recently has been surrounding a general election with the events set to either evict the Tories from power or for them to receive a commanding majority.
Earlier this week the motion was carried for a general election to take place. In a landslide decision to table the vote for the 12th of December the vote received 438 votes in favour to 20 against. This follows Jeremy Corbyn’s previous challenge for Labour to table the election for the 9th December as he believed that students would be at their home address and therefore able to support his party to a greater extent.
With this being PM Boris Johnson’s fourth attempt to secure a general election since the beginning of his tenure, he has mentioned that this vote would make it easier to “get Brexit done” since he hopes to increase his support within Parliament and would make it easier to pass legislation and propose further negotiations with the EU.
Seemingly, Labour MPs are not too comfortable about their party’s position in the polls and their current public support, especially considering that the BBC’s poll tracker is predicting that the Conservatives are to receive an additional 10% more votes over Labour.
Whilst the election has not been finalised yet, it is highly anticipated to be passed and could be set to be one of the most volatility-causing elections in UK history as this will establish the extent to which a party, whoever elected, can influence the Brexit decision with the deadline now having been extended to the end of January.
With much resting on this decision, later on in the year it may be likely that Sterling rates will experience some volatile periods leading up to this key date and investors holding Pounds may wish to consider their options in the lead up to December.
The Euro may be set for some movement as Eurozone Consumer Price Index and Q3 GDP data is due out for release later today. For clients holding Euros it may be something to watch with caution as it is expected that inflation figures are set to drop to 0.7% from 0.8% and GDP growth is set to slow to 0.1% from 0.2% back in September according to FX Street.
With Germany’s GDP contracting in the second quarter in a technical recession, the Eurozone is sitting on very shallow growth at present. Additionally to this, the stagnant economic data is also showing its effect on sentiment within the Bloc as pessimism for the EU’s economy reached 9 points – the lowest level since 2015.
Without any major upcoming developments to reverse the growing concerns within the Eurozone, it may be expected that there will be continued uncertainty leading into the future. This has been shown recently alongside previous Brexit-bolstered progress which has pushed GBP/EUR figures to current key resistance levels of 1.16.
Last night marked the release of the US Federal Reserve Bank’s decision to cut interest rates from 2% down a quarter point to a target range of 1.5-1.75% which follows 2 previous cuts from 2.25% and 2% respectively. The current levels are now the lowest seen since Spring 2018. The decision was not completely unanimous however, the vote was tabled at 8 in favour of a rate cut with 2 opposed comprising of Fed policymakers Esther George and Eric Rosengren who also pushed for rates to remain unchanged on the previous interest rate decisions.
An important element to take away from the decision is that of the change in wording of the policy guidance. This means that instead of the Fed taking a proactive approach to stimulating the economy using a rate change, they will take a reactive approach meaning that they are going to review the effect that the previous rates changes had and only change them should there be any signs of economic slowdown. Essentially, this may mean that the Fed are unlikely to move interest rates again for a while until the impact of their cuts has been fully assessed.
Lastly for the USD, Non-Farm Payroll data is released alongside the Manufacturing PMI. It is looking to be set with mixed emotions since the GDP growth fell from 2% to 1.9% but far better than the predicted 1.6% set for the October release.
As these figures provide an accurate reflection of the US’ economic state, the release could cause some volatility.
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