GBP/USD breaks through $1.30 on hopes for a Conservative majority

Philip McHugh December 4th 2019 - 2 minute read

The pound roared back to life yesterday on the back of polling data suggesting the Conservatives are pulling ahead of Labour once more.

Sterling remains buoyed this morning, with GBP/EUR ticking up to €1.1758, GBP/USD climbing to $1.3028, and GBP/CAD rising to C$1.7325. GBP/AUD and GBP/NZD both surged, striking AU$1.9128 and NZ$2.0034 respectively.

In the spotlight today we have the publication of the latest ISM non-manufacturing PMI. Will the US dollar rally if the service sector continued to expand at a robust pace in November?

What’s been happening?

The pound shot higher yesterday, recouping its losses from the start of the week in response to polling figures indicating that the Tories are extending their lead over Labour.

The latest survey conducted by Kantar suggested the Conservatives currently command a 12 point lead over Labour, stoking hopes that Johnson will be able to secure a majority next week.

GBP investors hope a Tory majority will allow Johnson to push his Brexit deal through parliament, ending over three years of uncertainty.

Meanwhile, the euro was side-lined on Tuesday by threats from the US to impose tariffs worth $2.4bn on a number of iconic French exports as a response to France’s plans to implement a digital service tax aimed at major US tech giants.

The US dollar was also hit with trade related woes during yesterday’s session, with concerns that a US-China trade deal could be delayed until late 2020 spooking some investors who fear it could hurt US economic growth.

What’s coming up?

Top of the agenda today will be the publication of the ISM non-manufacturing PMI.

This may help the US dollar recover some ground later this afternoon if it reveals that growth in the US service sector continued to expand at a solid pace last month.

Aside from the ongoing political uncertainty, the pound may also be influenced by the publication of the UK’s latest services PMI this morning if it confirms that growth in the sector slumped to a 40-month low in November.

Finally, the euro may struggle to accelerate this morning if the Eurozone’s own PMI release shows a slowing of service sector activity last month.

Written by
Philip McHugh

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