The pound fell slightly on Tuesday but stayed close to its six-month highs against the euro, with investors still confident of a Conservative parliamentary majority on December 12th. By the late afternoon, Sterling had lost 0.22% against the euro and 0.13% against the dollar.
Last night’s leadership debate did little to move the pound, the most probable reason for swings could have been caused by Labour party leader Jeremy Corbyn gaining a poll advantage over his performance but that does not appear to have materialised.
Analysts have continued to point out that even if the UK were to leave the EU on the 31st of January through Boris Johnson’s withdrawal agreement, he would still have to negotiate an ongoing trade agreement within a year. This longer-term uncertainty will prevent the pound from jumping to far above the $1.30 mark.
GBPUSD opened at 1.2956 and fell slightly across the day, closing at a low of 1.2929
GBPEUR opened at a 1.1704 and fell more sharply, closing at 1.1670 but reaching an evening low of 1.1655
The US dollar crept higher against a basket of currencies on Tuesday, ending three consecutive days of losses caused by the cautious approach to the US-China trade talks. The dollar index was up 0.05%. Uncertainty around whether “phase one” of the trade deal would be signed and whether this would mean tariffs due to come into effect on December 16th would be rolled back, has been the cause of dollar weakness in recent days.
Investors are also awaiting the release of Federal Reserve meeting minutes today. The Fed had agreed to cut interest rates for the third time this year but there may be more details regarding further interest rate cuts.
Elsewhere the dollar lost 0.12% against the Japanese yen and the Australian dollar fell 0.28% against its US rival after the Reserve Bank of Australia said it would consider cutting interest rates this month.
EURUSD opened at 1.1069 and made modest gains across the day, closing at 1.1078
