GBP/USD: A No-Surprise Fed Keeps Pound Even vs. Dollar

The previous week was a volatile week for the pound euro exchange rate. The pair flitted in and out of positive territory before closing the week 0.86% higher. The pound gained a solid 1.1% versus the common currency in November, its fourth consecutive month of gains. The pair was declining at the start of the new trading week.

Optimism that the Conservative party will win a majority in the election on 12th December boosted the British pound across the previous week. Bets of a Tory majority are bolstering hopes that a damaging no deal Brexit will be avoided, and that Parliament will push Boris Johnson Brexit deal through quickly. This would enable the UK to leave the European Union by 31st January and put an end to the Brexit uncertainty that has dragged on the UK economy for the past three and half years.

Opinion polls ahead of the general election will dominate sterling trading in the coming week. Further indications that the Conservatives will win with an overall majority are likely to lift the pound. Any signs that Labour are catching up could weaken sterling.

The latest polls are showing the Tories with a lead of between 7% – 11%. However, Labour has been closing the gap recently. Investors will be watching to see whether the Conservative lead is in danger of slipping, increasing the chances of the UK heading towards a hung Parliament. A hung Parliament would increase the chances of a no deal Brexit or more Brexit uncertainty.

Manufacturing PMI & Christine Lagarde In Focus

The euro showed some resilience in the previous week; however, demand was broadly weaker for the common currency owing to dollar strength. The euro trades inversely to the dollar. When the dollar rallies, the euro slumps.

Recent eurozone data has shown tentative signs that the eurozone economy could be turning a corner after months of sluggish or no growth. Should eurozone data continue to improve it could offer further support to the common currency.

Today investors will be looking towards eurozone manufacturing pmi’s. A speech by the new European Central Bank President Christine Lagarde will also be in focus as investors look for further clues a to whether the ECB will look to ease monetary policy again.

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 GBP = 1.13990 EUR

Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound.

Or, if you were looking at it the other way around:

1 EUR = 0.87271 GBP

In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.

 


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