The pound fell slightly on Monday as polls started to show that the Conservative Party’s poll advantage had begun to narrow, with most polls showing around a 7-9-point lead rather than the 10-13 seen last week. The pound fell 0.1% against the dollar early in the day and was unchanged against the euro. Option prices indicate that investors are preparing for high levels of volatility during the remainder of the election period.
The pound’s gains, based on polling data, will be capped by the fact that this election appears to be following a similar pattern to that in 2017. Markets remain uncertain whether the UK will leave the EU on January 31st and whether favourable negotiations will be managed within the year. This long stretch of uncertainty has damaged the British economy, and the CBI has downgraded their forecast for next year.
GBPUSD opened at 1.2917 and fell in the morning to a low of 1.2899. However, the pair picked up in the afternoon to close at a high of 1.2935
GBPEUR opened at 1.1725 and was stable for most of the day before dropping sharply in the late afternoon to close at 1.1678
The dollar to a two-week low on Monday as data showed the US manufacturing sector shrank for the fourth consecutive month as well as an unexpected fall in construction spending. The dollar also fell from six-month highs against the Japanese yen and reached a two-week low against the euro.
The dollar index was 0.4% lower and investors have begun preparing for another potential rate cut next year. The dollar had made some gains earlier in the day after Chinese manufacturing data lifted hopes for a brighter outlook for world growth.
The euro was 0.6% higher against the dollar as positive manufacturing data from the eurozone fuelled some optimism on the regions outlook.
EURUSD opened at 1.1018 and made strong gains in the afternoon, reaching a high of 1.1085 shortly before closing
