UK General Election set for December 12th
Wednesday 30 October, 2019
Daily Currency UpdateGBP - British PoundSterling has picked up over the past 24 hours after it was confirmed the UK will be heading to the polls for a general election on December 12th, the first winter general election in nearly 100 years. After being defeated in Monday night's vote, which required a 2/3 majority to pass under the Fixed Term Parliament Act, PM Boris Johnson managed to get a bill passed that required a simple majority so we are set for what the markets are now calling "Jingle Polls." In an about turn, Labour leader Jeremy Corbyn has stated that he believes no-deal is now off the table, which it isn't, however the fact that the EU has extended our scheduled exit date to January 31st seems to have been enough to persuade him to endorse the election. However a Labour amendment to bring it forward to Monday December 8th was defeated in parliament. The rationale behind this slightly earlier date was there were some lingering concerns Johnson may still try and force through Brexit before parliament is dissolved and it would also benefit students registered to vote at their universities to hang around for their final weekend of term to vote. Students are more likely to be remainers which could have pulled in more votes for Labour, however the logistics of holding an election last minute on a Monday, fading concerns over Johnson's threat to push through Brexit and given postal voting is now available put this amendment to bed.GBP/USD has rallied from around 1.28 to touch 1.29 earlier this morning with all eyes now focused on election polling ahead of the vote. Currently the bookies have a Tory majority as odds on favourite, so should this play out then it seems likely Johnson's Withdrawal Agreement will pass adding support to the pound. Should the SNP, Lib Dems or Labour make gains in the polls then it will add to Brexit uncertainty to the pounds detriment.It should be noted that polls were wrong in the previous general election and the EU referendum, however they will likely be the main driver for the pound over the next six weeks. GBP/EUR continues to trade just below 1.16.
Key MoversTodays main event will be the US Federal Open Market Committees interest rate decision which is due at 7pm tonight. A cut from 2% to 1.75% is all but guaranteed however the message over another move in December will be the main driver of the greenback. Markets are expecting another cut before Christmas. Should Fed Chair, Jerome Powell give a more hawkish message then we should expect a dollar rally. Given the ongoing US/China trade impasse it seems an overly positive message is unlikely.Before the Feds rate decision we have more key data from the States with the first estimate of US Q3 GDP due to show a further slowdown from 2.1% y/y to 1.6% y/y, a far cry from Q2 2018s reading of 4.1% y/y. Shortly before the growth data we have the ADP jobs report with 125k expected to be added for the month of October. Friday's official Non-Farm Jobs Payroll is predicted to show a more downbeat 90k for the month. EUR/USD sits at 1.1120 with USD/JPY just below 109.00 at the time of writing.
- GBP/USD: 1.2775 - 1.2925 ▲
- GBP/AUD: 1.8670 - 1.8820 ▲
- GBP/NZD: 2.0170 - 2.0310 ▲
- GBP/CAD: 1.6790 - 1.6925 ▲