IFX Market Report: Friday 8th November 2019

The pound fell to a two-week low on Thursday after two Bank of England officials voted to cut interest rates this month, whilst others said they would consider doing the same if the weight of Brexit and global trade uncertainty did not ease. Most forecasts had predicted a unanimous decision, but the vote was split 7-2 in favour of keeping rates at 0.75%. The pound fell 0.26% against the dollar and 0.4% against the euro.

Analysts are raising their expectations for a rate cut next year, with the probability quoted as high as 40% by March. The potential for of a hung parliament after the December 12th election could also boost this probability of a rate cut. Some analysts believe the markets are potentially too complacent about a Conservative party majority and are not pricing in a sufficiently high probability of a hung parliament.

GBPUSD opened at 1.2860 and fell to an early afternoon low of 1.2803 after the BoE announcement, recovering slightly afterwards to close at 1.2823

GBPEUR opened at 1.1612 and followed a similar pattern, hitting a low of 1.1560 but recovering more strongly to close unchanged at 1.1612

The dollar reached a five-month high against the Japanese yen on Thursday as positive news of a US-China trade deal emerged. Both countries have agreed to roll back tariffs on each other’s goods, increasing global risk appetite. The dollar gained 0.2% against a basket of currencies, with the euro losing 0.2% as well.

Currencies exposed to trade risk such as the Australian and New Zealand dollars both gained 0.3% against their US rival.

EURUSD opened at 1.1077 and dropped steadily across the day, closing at a low of 1.1045

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