The pound clawed back early losses yesterday as it became more likely that Prime Minister Boris Johnson would finally manage to successfully push through a bid for a December General Election.
Leader of the main opposition party Jeremy Corbyn told his shadow cabinet earlier in the day that he felt the EU’s decision to grant a flexible Brexit deadline up to the 31st January meant that a no-deal Brexit was effectively now off the table and he would finally give in to the PM’s request of an election showdown at the fourth time of asking.
When it came to the vote later in the day with support coming from Labour, the SNP and Liberal Democrats, parliament voted 438 to 20 in favour of holding a December election, the first in nearly 100 years.
GBPUSD dropped to a low of 1.2810 around 9.00am but rose as the day continued hitting 1.2866 by lunchtime and eventually topping out at 1.2904 in the afternoon.
GBPEUR trading was far more choppy, like GBPUSD it fell to a low of 1.1562 in the morning and recovered in the afternoon but after hitting resistance at 1.1608, the rally ran out of steam and the pair passed back and forth through the 1.16 level 10 times during the course of the afternoon.
Moving forwards, investors and financial markets are unsure about exactly how the election will pan out. Whilst Johnson’s Conservative party command a strong lead in the opinion polls, Theresa May took on Jeremy Corbyn in 2017 and almost lost an unlosable election.
May ended up having to strike up a deal with the DUP to gain a very slim majority which is a large contributing factor in why parliament has failed to agree on any aspect of the UK’s withdrawal from the EU. Johnson is hoping he will gain seats and end up with a healthy majority to help him finally break the Brexit deadlock. Labour, the Lib Dems and SNP have other ideas which could include a People’s Vote on passing any deal or revoking Article 50 altogether and cancelling Brexit.
The US dollar slipped against a basket of currencies after US consumer confidence fell in October, the third time in a row since August. The dollar index fell to 97.64. Additionally, dollar investors were cautious ahead of the conclusion of the Fed’s policy meeting which ends this evening. Markets are expecting the Fed announce a reduction in interest rates by 25bps.
EURUSD dropped slightly on open to a low of 1.1076 but climbed for the majority of the day reaching a high of 1.1117 shortly before close.
The Australian dollar climbed for a third straight session against the US dollar as trade talks between the US and China appeared to be going well, the Australian economy relies heavily on China as a source of exports. President Trump said he expected to sign off a significant part of a new deal ahead of schedule.
