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Sterling surge continues as markets start to price in Tory majority

GBP - British Pound

Sterling's upward rally continues unabated as markets grow in confidence that next Thursday's general election will result in a Conservative majority. Every poll released continues to see the Tory's between 7-12 points ahead of Labour and with markets keen for certainty over Brexit the "ready to go" withdrawal deal PM Boris Johnson has negotiated with the the EU would finally put an end to the drama and allow the two sides to begin on trade negotiations.

After cracking through technical resistance around the 1.30 handle GBP/USD has continued to rally up through 1.31 overnight and is continuing to rise. Given that polling has proved wrong over recent elections it may be traders are getting ahead of themselves however markets believe Boris will get at least the 326 seats needed and book makers' odds have shortened to 2/5 too. Should this not come to fruition and we end up with a hung parliament then a major collapse of the pound is all but assured.

The PM confirmed yesterday that if he gets the majority he wants then we will get a budget, with possible tax cuts and new laws passed within 100 days. GBP/EUR is up to 1.1850.

Key Movers

There was tension at the NATO leaders meeting in London yesterday as Canadian PM, Justin Trudeau was caught on camera allegedly belittling US President Donald Trump over a long drawn out out off the cuff press conference. As a result Trump accused the Canadian PM of being "two faced" and cancelled his final scheduled press conference before heading back to the States.

Although it isn't a market moving event it highlights the unpredictability of Trump and gives insight into how other leaders view the US President. It also possibly gives an indication of how difficult it will be to get a trade deal between the US and China over the line, especially as we enter the 2020 election year and Trump appearing in no hurry to get one done.

His hand may be forced though should US data continue to under perform as it did again yesterday as both the ADP Non-Farm employment change and the ISM Non-Manufacturing PMI both missed target. This following on from an appalling ISM Manufacturing number on Tuesday shows a slowing US economy and the last thing Trump wants is an economic downturn before the November election.

Yesterday saw the Bank of Canada hold rates at 1.75% and give an unexpected upbeat assessment of the economy. USD/CAD fell from around 1.3280 to 1.3180 as a result. Overnight Australian Retail Sales came in flat when a 0.3% uptick was expected. AUD/USD is heading back to .68 as a result.

There has been more poor data from Germany this morning as October Factory Orders printed -0.4% vs the 0.4% predicted again highlighting the impact of the trade war is having on the EUs powerhouse. USD/JPY trades around 108.90 with EUR/USD at 1.1090.

Expected Ranges

GBP/USD: 1.3070 - 1.32 ▲

GBP/EUR: 1.1770 - 1.19 ▲

GBP/AUD: 1.9140 - 1.93 ▲

GBP/NZD: 2.0 - 2.0180 ▲

GBP/CAD: 1.7265 - 1.74 ▼