The pound jumped on Monday, still riding the wave of the general election victory for Boris Johnson’s Conservative Party and the optimism that they will end the Brexit uncertainty. The pound gained as much as 0.1% against the dollar in early trading. The UK PMI data for services and manufacturing sectors in December highlighted the weakened state of the economy and caused losses in the afternoon. A stronger euro also the saw sterling fall 0.2%.
Despite the pounds strong rally late last week, it remains far off the pre-referendum high of almost $1.50. Boris Johnson plans to submit the Withdrawal Agreement bill to parliament on Friday and demand for the pound remains high. However, markets will shift their focus back to fundamental economic data in the new year.
GBPUSD opened at 1.3393 having hit a high of 1.3415 in early trading. The pair fell steadily across the rest of the day to close at 1.3330
GBPEUR opened at 1.2017 and fell steadily across the day to close at 1.1966
The dollar was steady against most currencies on Monday, whilst investors await further details on the US China trade agreements. The “phase one” trade deal agreed between the two nations has been “absolutely completed” according to National Economic Council Director Larry Kudlow, who said that US exports to China would double.
Caution over future trade talks moved the dollar index lower by 0.15%. The completion of phase one was a good achievement but the journey to get to this point was filled with uncertainty, U-turns and false hope that investors are not prepared to gamble heavily on any further outcomes.
The euro remained near a four-month high against the dollar, but the Japanese yen fell to a two-week low on Friday.
EURUSD opened at 1.1145 and was steady across the day, closing at 1.1143