Pound Tumbles Against Euro as Britain Heads for Coalition Chaos

The pound pushed higher versus the US dollar on Wednesday. The pound US dollar exchange rate jumped meaningfully through US$1.29 to a high of US$1.2947. The pair is advancing further in early trade on Thursday.

The pound has traded erratically across the week as investors remain fixated on the UK election, on 12th December. On Monday sterling rose, only to fall on Tuesday and rally back on Wednesday. The election polls have been driving movement in the pound.

Any signs of the Conservatives winning by a clear majority is sending the pound higher. Pound investors are seeing this as the surest way for Boris Johnson’s Brexit deal to be voted through Parliament, ensuring the UK leaves the European Union with a deal on 31st January. Through an orderly exit, the UK will be avoiding a damaging no deal Brexit and also avoiding the continued Brexit uncertainty which has weighed on the UK economy for the past three and a half years.

Today the pound stormed higher in the US session after the closely watched and highly anticipated Multilevel Regression and Post-Stratification (MRP) YouGov poll results. This poll is considered to be more accurate than standard polls and correctly predicted that Theresa May would lose her majority in the 2017 general election. The MRP poll put the Conservatives in the lead with a clear majority of 68.

Standard polls continue to show the Conservative lead narrowing. Investors will stay fixed on the election polls and headlines across today’s session.

President Trump Signs Hong Kong Bill Into Law

The dollar traded broadly higher on Wednesday, just less so than the pound. Investors cheered encouraging data from the US.

Data showed that the US economy grew by more than initially anticipated. The second estimate of US GDP for the third quarter printed at 2.1% on an annualised basis, a revision up from 1.9% and above the 2% print from the second quarter.

US durable goods orders also surprised to the upside. US durable goods orders increased 0.6% month on month in October. US inflation showed a touch of weakness. However overall the data pointed to the US economy continuing along a solid path. The data eased fears of a slowdown spilling over from the manufacturing sector, boosting the dollar.

Today is the Thanksgiving public holiday, volume is expected to be low across today, although President Trump signing the Hong Kong bill into law could strain US — China relations. This is unlikely to go unnoticed.

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.

 


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