The pound declined versus the US dollar on Wednesday on news that Boris Johnson slipped in the polls and as the signing of the US — China trade deal could be pushed back to December. The pound is trending lower in early trade on Thursday.
With no high impacting data to focus on, domestic politics stole the show on Wednesday and sent the pound lower across the board.UK Parliament was officially dissolved and the general election campaign began. A YouGov poll showed that support for Boris Johnson fell by 2 points to 36%. Support for Labour the main opposition remained steady at 25%.
The pound would prefer Boris Johnson to win and with a strong majority. This would mean that his Brexit deal could pass quickly through Parliament. In short, this scenario would mean the UK is leaving the EU by 31st January with a deal. Par cancelling Brexit this is the pound’s preferred option.
Today investors will look towards the Bank of England’s super Thursday. The central bank will give its monetary policy announcement, release the minutes to the monetary policy meeting and release the quarterly inflation report.
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Analysts widely believe that the central bank will leave monetary policy unchanged. The minutes are also expected to show that policy makers will vote unanimously to keep rates on hold. Under this scenario, pound investors will focus on BoE Governor Mark Carney’s tone and the quarterly inflation report.
Even though there is a calm surrounding Brexit, some analysts believe that the central bank could drop its hawkish bias as Brexit uncertainty continues and as inflation fails to move higher. Should the BoE drop its hawkish bias the pound could slip lower.
US Dollar Rises On Reduced Risk Appetite
The dollar was in demand in the previous session amid a risk off sentiment. With no high impacting economic data for investors to focus on, US — China trade headlines were under the spotlight. Earlier in the week, positive headlines dominated, with talk of President Trump and President Xi potentially signing a phase one trade deal this month. However, yesterday reports indicated that the date could now be pushed back to December. This unnerved investors. When risk off dominates, investors often turn to the US dollar for its safe haven status.
Today there is some mid-tier data which is due to be released. Other than that US — Sino trade headlines will drive movement in 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. |
