The pound hit a two-and-a-half year high against the euro on Wednesday as expectations of a Conservative majority continue to fill the markets with optimism. The pound has managed to push through key technical barriers as it gained 1% against the dollar at one point and 0.9% against the euro, its highest level since May 2017.
PMI survey data showed that Britain’s services sector shrank in November, but the pound was unaffected by this news. Having gained 8% against the dollar since October, investors have very much attached themselves to the idea that a no-deal Brexit will be avoided and the three years of uncertainty coming to an end. The 10-point poll lead indicates a majority of about 48 for Boris Johnson’s Conservatives.
GBPUSD opened at 1.2994 and jumped very quickly, continuing to rise across most the day, reaching an afternoon high of 1.3116 before closing at 1.3093
GBPEUR opened at 1.1731 and performed similarly, closing near a high at 1.1823
Risk appetite improved on Wednesday after more positive remarks from President Donald Trump regarding trade negotiations. The dollar index fell 0.1% as riskier assets made gains, but the greenback did make gains of 0.2% against the Swiss franc and the Japanese yen.
US payroll and service sector data came in weaker than expected and highlighted that the US economy was slowing down. Private sector hiring also slowed more than expected. The Federal Reserve had previously said that it is on hold in terms of changing interest rates though some analysts are considering whether this data will be enough to make them rethink this position.
EURUSD opened at 1.1077 and was flat across the day, despite a brief afternoon jump to reach a high of 1.1107, before ceding all of these gains to close almost unchanged at 1.1075