Pound steady, UK heads towards early election

Philip McHugh October 30th 2019 - 2 minute read

Pound upside limited as markets prepare for a fresh election
 
The pound recorded modest gains after Labour announced its intention to support the motion for an early general election.
 
Although the UK now looks set for another few months of political anxiety ahead of the new Brexit deadline this had little impact on GBP exchange rates for the time being.
 
As long as the Brexit extension is formally approved the pound is unlikely to come under any significant pressure in the short term.
 
Even so, as markets brace for a fresh general election political volatility could still drag on GBP exchange rates in the days ahead.
 
 
Euro vulnerable to easing German inflation
 
An unexpected uptick in Spanish retail sales offered support to the euro yesterday, suggesting a greater level of consumer confidence within the Eurozone economy.
 
However, the mood towards the single currency could easily sour this afternoon as forecasts point to a weakening of Germany’s headline inflation rate.
 
If October’s consumer price index eases from 1.2% to 1.1% on the year this would give the European Central Bank (ECB) encouragement to maintain a dovish policy bias.
 
A similarly underwhelming performance from the monthly inflation reading may help to drag EUR exchange rates lower across the board.
 
 
US dollar forecast to hold steady on Fed interest rate decision
 
As October’s US consumer confidence index failed to pick up as forecast this limited the appeal of the US dollar.
 
With markets already braced for an imminent interest rate cut from the Federal Reserve USD exchange rates remained biased towards the downside.
 
If Fed policymakers follow through and cut interest rates tonight, though, the ultimate impact on the US dollar could prove muted.
 
Unless the Fed paves the way for further aggressive rate cuts USD exchange rates are likely to see limited losses in the near term.
 
 
Upcoming Data:
 
Wednesday, 30th October 2019
13:00 EUR German Consumer Price Index
14:00 CAD Bank of Canada Rate Decision
18:00 USD Federal Open Market Committee Rate Decision
 

Written by
Philip McHugh

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