Daily Currency Update

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Sterling reaching for fresh highs

GBP - British Pound

The pound yesterday rallied to fresh six month highs against the Euro as it smashed through GBP/EUR 1.17. This wasn't too far off the 1 year high for the currency pair which is just above 1.1800 so it isn't too much further to go for the pound. This move was largely driven by hope among currency traders that the Tories have enough support in the upcoming election to win a majority in Parliament. The hope was also underwritten by the announcement out of Conservative HQ that all the candidates standing in the election support the EU Withdrawal Bill. Maybe the Prime Minister's confidence is growing because yesterday in front of the CBI conference, which housed some of the UK's largest and most influential businesses, Johnson announced that the planned cut in corporate rates from 19% to 17% would be suspended and the money redirected to fund the NHS. Remarkably reports say no one batted and eyelid. GBP/USD is also flirting around the significant 1.30 level as well with YouGov indicating the Tories have support of 45% of the electorate. The TV debate between Johnson and Corbyn could be significant tonight though and there are still almost four weeks to go in this election campaign for the pound to be turned on its head.

Key Movers

There were further wobbles in the ongoing trade war yesterday, however these should only be described as wobbles. A report from Chinese media that Beijing still is pessimistic was yesterday's main talking point. Whilst a trade deal still looks likely there is a growing risk that the longer it runs on the more likely Beijing could sit on its hands whilst the impeachment inquiry and election looms over President Trump. The 'wobble' yesterday saw the riskier assets of US equities drop off marginally, whilst there was a small pick up in safer havens such as the Japanese Yen and gold. EUR/USD was supported by some USD weakness as well as fresh talk around fiscal stimulus. Phillip Lane of the ECB stated the Europe needs a big conversation on fiscal stimulus to stimulate the economy. Any time there is a hint of fiscal stimulus the Euro is supported. Finally, overnight we had the latest minutes from the Reserve Bank of Australia. The minutes indicated that the decision to keep rates on hold recently was to see the effects of the other three rate cuts this year.Whilst rates remained the same there is definitely a dovish bias at the RBA at the moment and therefore a bearish outlook for the Aussie dollar.

Expected Ranges

GBP/USD: 1.2940 - 1.3050▲

GBP/EUR: 1.1695 - 1.1830 ▲

GBP/AUD: 1.8925 - 1.9080▲

GBP/NZD: 2.0175 - 2.0305▲