The pound dipped lower versus a stronger dollar on Monday. The pound US dollar exchange rate declined across the session, falling steeply in the US trading hours. The pair dropped below US$1.29 to a nadir of US$1.2876. The pair remains sub US$1.29 in early trade on Tuesday.
The UK general election is front and central as far as pound investors are concerned. Pound investors remain focused on the polls. As things stand, Boris Johnson still holds a strong lead. Should Boris Johnson win and by a clear majority he will have a much easier time pushing his Brexit deal through the House if Commons. This means that there is a greater probability that Brexit will happen by 31st January and with a deal; avoiding a no deal scenario and avoiding the continual uncertainty that kicking the Brexit can down the road achieves. Therefore, Boris Johnson wining with a clear majority is the pound’s preferred outcome.
Pro-EU parties, the Lib Dems, Green party and Plaid Cymru could unveil a Remain election pact, potentially as early as Thursday. Under the pact, they will step aside for each other in dozens of constituencies, in order to maximise Remain candidates’ chances. This could affect the chances of Boris Johnson taking a clear and strong majority, which could hit demand for the pound.
Today investors will be looking towards service sector pmi data. Analysts are forecasting a tick higher in activity in the dominant service sector. Service sector pmi is expected to be 45.9 in October, up from 45.7 the month previous. The sector remains in deep contraction, which could unnerve investors. Given the dominance of the service sector any weakness could mean that the BoE looks ease monetary policy to support the failing economy. The prospect of weaker rates pulled the pound lower.
US ISM Non — Manufacturing Data To Lift Dollar?
After being battered across the previous week, the dollar soared late in the US session on Monday. Weaker than expected US factory orders data, weighed on demand for the greenback in early trade yesterday. However, the dollar found demand in US trading hours as the US stock market soared to an all-time high, boosting demand for the American currency.
Today investors will look towards US ISM non-manufacturing data, which could help the dollar extend its gains. Analysts are expecting activity in the US non-manufacturing sector to have picked up in October. This would quell fears of a slow down in the US and could boost the value of the dollar.
|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.