The pound hit a six-week high on Tuesday against a broadly weaker US dollar as a new poll showed the Conservative Party widened its poll lead before the December 12th election. The pound gained as much as 0.5% against the dollar. Analysts have said the currency markets have found relief in the increased probability of a majority for Boris Johnson and his Brexit withdrawal agreement. A Conservative victory could finally see an end to the Brexit uncertainty, but analysts believe that economic data will become the main driver for pound swings after January 2020.
The pound also gained 0.4% against the euro, but investors remain mindful of the 2017 election where the Conservatives had a similar sized lead two week before the election so the prospect of a hung parliament or a Labour victory is not completely out of sight. This has led to a slight increase of short positions over the last two weeks.
GBPUSD opened at 1.2965 and made steady gains across the day, closing at 1.3003
GBPEUR opened at 1.1708 and reached an early afternoon high of 1.1741 but dropped slightly to close at 1.1726
Safe haven currencies like the Swiss franc and Japanese yen made gains against the US dollar on Tuesday as risk appetite reduced after US President Donald Trump said that a trade deal with China might have to wait until after the 2020 presidential election. This also caused China’s offshore yuan to hit its lowest level since October against the dollar. Overall the dollar index was down 0.1%.
Analysts have begun to describe the trade deal developments as a “never-ending cycle” of creating anticipation for global growth and then throwing a spanner in the works. In addition to this, the Trump impeachment inquiry released a report prepared for the House Judiciary Committee which will consider drafting articles for impeachment. Markets remain undeterred by this inquiry as analysts do not see any way the republican-controlled senate would ever vote for impeachment.
EURUSD opened at 1.1076 and was stable for most of the day, making only slight gains in the afternoon to close at 1.1091
