The pound fell against the dollar on Thursday as the Prime Minister called for a general election on December 12th, having withdrawn the Brexit Bill from parliament. The EU will today decide whether to grant the UK an extension to the Brexit deadline until January 31st. Though most member states are in favour, France has argued for a shorter extension to allow for the Brexit deal to be ratified by parliament.
The added uncertainty of an election could further hurt the pound in the near term, dropping 0.47% against the dollar and 0.26% against the euro yesterday. During an election campaign, polling data will cause swings and will prevent investors from taking any aggressive positions until an outcome is clear.
UK parliament will vote on Monday whether to hold an election, this will require the backing of the opposition Labour Party, who have so far said they will wait to see what the EU decides before committing to a decision.
GBPUSD opened at 1.2907 and fell to a late afternoon low of 1.2793 and recovered slightly to close at 1.2849
GBPEUR opened at 1.1579 and hit an afternoon low of 1.1530 before closing at 1.1569
The dollar index benefitted from Sterling weakness and gained 0.16% on Thursday. However, the euro however fell 0.21% despite European Central Bank President Mario Draghi giving showing some optimism in his final press conference in office. This caused an early rally in the single currency but there was no further news to keep it at these heights.
Later today German business sentiment data is expected to show that confidence has weakened in October. This has increased fears of a recession due to the US-China trade war and Brexit.
EURUSD opened 1.1145 and rose to a high of 1.1155 following Draghi’s comments before quickly falling to an afternoon low of 1.1095 and recovering to close at 1.1106
