IFX Market Report: Tuesday 19th November 2019

The pound made further gains on Monday as the Conservative party’s poll lead increased from 10 to 17 percentage points ahead of the opposition Labour Party. This means the market is pricing in a higher likelihood of a Conservative majority. The pound was up 0.5% against the dollar early in the day, unaffected by comments from the CBI’s director general who warned that British business should feel threatened by both far right and far left ideologies.

The pound also gained 0.2% against the euro at one point but analysts pointed out that gains above $1.30 against the dollar are unlikely regardless of optimistic polls. The Labour Party manifesto is to be released on Thursday and investors looking for pound strength will hope it does not perform as well as it did in 2017 to ensure the current poll lead converts to a Conservative majority on December 12th.

GBPUSD opened at 1.2959 and hit a morning high of 1.2981 before dropping back in the afternoon to close at 1.2963

GBPEUR opened at 1.1708 and reached a high of 1.1730 and dropped back down to close at 1.1699

The dollar fell against the yen and the euro on Monday after media reports cast doubt on hopes of a US-China trade deal. On Sunday Chinese state media referred to talks as “constructive” so some analysts believe the market has overreacted to more recent news. This appears to be the normal fluctuation of news that markets have come to expect from these negotiations.

Investors are most critically looking for any sign that tariffs will be rolled back as they are the main barrier to global economic growth. The next set of tariffs coming into effect on December 12th. The euro has rebounded from the two-year low it hit at the start of October due to optimism that a trade deal will come. Analysts believe that the European economies and beyond need to be more resilient in order for a euro rally to be sustained.

EURUSD opened at 1.1057 and rose sharply in the afternoon to hit a high of 1.1089 before closing at 1.1080

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