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Volatility in the pound continued on Thursday with the pound giving back some of the gains from the previous session. The pound US dollar exchange rate rallied to a 5-day high of US$1.2951 before trending lower across the latter part of the day. The pair closed down 0.1% at $1.2912. The pound is edging lower in early trade on Friday.
The pound has flitted between gains and losses across the week. Election speculation has been the root cause of the volatility ahead of the British elections in under 2 weeks. The pound surged in early trade on Thursday after the MRP poll predicted a 68-seat majority would be won by the Conservative party.
The MRP poll uses a new polling method and is considered to be the most accurate poll ahead of the elections. Investors are tying a strong Tory majority to a Brexit deal being ratified by Parliament enabling the UK to leave the EU with a deal by 31st December. This is the most believable way for the UK to avoid a damaging no deal Brexit.
The pound quickly gave up the poll inspired spike higher as investors grew cautious. Firstly, the MRP poll does not reflect recent political developments. Secondly investors fear that the polls could encourage complacency from the Conservative HQ. These fears have been compounded by Boris Johnson’s no show on a live TV debate on the environment.
Polls will continue to drive movement in the pound on Friday. Investors will also look ahead to UK GFK Consumer confidence data. Analysts are expecting household sentiment to remain depressed in November. If this is the case it doesn’t bode well for the crucial holiday shopping period. When consumers are feeling less confident, they often spend less. This is bad news for the UK economy and inflationary pressure. Therefore, a weak reading could drag on the pound.
Dollar Trading Volumes To Remain Thin
The previous session was a dull session for the US dollar owing to the Thanksgiving holiday. US stock markets were closed and the US dollar experienced thin volumes.
The US China trade disputes has been in focus across the week. However, just as both sides were agreeing that they were close to signing a phase one trade deal President Trump signed the Hong Kong bill into law. This was a move that could rock an already very fragile relationship. China had pre-warned Trump not to interfere in China’s domestic issues. Whilst China has threatened to react it stopped short of taking any action. Risk appetite took a slight hit.
Today the US markets are close for half a day. It is also Black Friday, one of the busiest shopping days of the calendar. Investors will be looking to see how retailers are fairing to gauge the health of the consumer
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| 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. |
