The pound extended gains versus the US dollar for a fourth straight session on Thursday. The pound US dollar exchange rate rallied to a ten-day high of US$1.2975 before closing the session 0.3% higher at US$1.2933. The pair is advancing in early trade on Friday.
The pound has had one of its strongest months in a decade, thanks to Brexit developments and as the UK heads towards the uncertainty of a general election. A no deal Brexit has been the biggest risk to the pound. The chance of a no deal Brexit has evaporated after Prime Minister Boris Johnson arranged a new deal with the European Union. A month of fast-moving political developments has seen the pound jump from US$1.20 to US$1.30. Any further progress for the pound could be hampered by the general election.
The focus now for pound investors is the polls. On Thursday the pound soared after polls showed that Boris Johnson had a clear lead over the opposition leader Jeremy Corbyn. Furthermore, support for the Conservatives is growing. Should Boris Johnson win the election with a clear majority, this would give him a strong mandate to push his Brexit deal through Parliament. In short, this would mean that the UK would be leaving the EU on 31st January with a deal. Positive news for the pound.
There is no high impacting data to be released today. Investors will focus on domestic political headlines and polls.
Will Dollar Drop Post NFP?
The US was out of favour across the board in the previous session amid softer inflation data and rising US — China tensions.
Investors will now turn their attention to the US non-farm payroll report. This is the most closely watched macros economic release across the month. Analysts are expecting 85,000 jobs to have been created in the US in October. This would be lower than the 136,000 created in September. Unemployment is expected to rise 0.1% to 3.6% and average hourly earnings are expected to climb 0.3% on the month and 3% across the year. Any signs of weakness in the jobs report could raise fears that the slump in the US manufacturing sector is spilling out across the broader economy. This could send the dollar lower.
|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 = 1.28934 USD
Here, £1 is equivalent to approximately $1.29. This specifically measures the pound’s worth against the dollar. If the US dollar amount increases in this pairing, it’s positive for the pound.
Or, if you were looking at it the other way around:
1 USD = 0.77786 GBP
In this example, $1 is equivalent to approximately £0.78. This measures the US dollar’s worth versus the British pound. If the sterling number gets larger, it’s good news for the dollar.