UK election news sends GBP to new multi-month highs

Philip McHugh December 5th 2019 - 2 minute read

  • Pound surges on expectations for a Conservative victory
  • Euro struggles amid market risk aversion
  • Steady BOC encourages Canadian dollar gains

 
 
UK political developments send Sterling soaring

The pound was catapulted to new multi-month highs on Wednesday amid growing expectations the Conservatives will win a landslide victory next week.

The majority of opinion polls show the Tories have retained a double digit lead over Labour as we enter the final week of campaigning.
 
Also offering Sterling some support on Wednesday was the UK’s services PMI, which saw growth in the sector revised up from a 40-month low to an 8-month low in November. 
 
While UK economic data is thin on the ground today, the pound is likely to remain buoyed by election speculation.
 
Lower Eurozone retail sales set to add to euro losses
 
While the finalised set of Eurozone services PMIs saw some improvement this was not enough to shore up the euro yesterday.
 
Worries over the outlook of the Eurozone economy remain thanks to escalating global trade tensions and the risk of further US tariffs.
 
The euro could fall further out of favour this morning as forecasts point towards a monthly fall in Eurozone retail sales.
 
Evidence that consumer spending is weakening would raise the risk of weaker fourth quarter growth, leaving the single currency exposed to fresh selling pressure.
 
Canadian dollar vulnerable to widening trade deficit
 
The Bank of Canada’s (BOC) decision to leave interest rates on hold at its final policy meeting of 2019 gave the Canadian dollar a boost.
 
While the move was widely expected, investors still took encouragement from the fact that policymakers indicated their belief that the current interest rate is ‘appropriate’.
 
With the BOC looking set to leave interest rates on hold for longer CAD exchange rates found fresh cause for confidence.
 
However, the Canadian dollar could return to a weaker footing this afternoon if October’s trade deficit widens as anticipated.
 
 
Upcoming Data:
 
Thursday, 5th December 2019
10:00 EUR Eurozone Retail Sales
13:30 CAD Trade Balance
13:30 USD Trade Balance
 

Written by
Philip McHugh

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