The euro soared versus the US dollar at the end of the Thursday after results the UK election showed that the Conservatives won a landslide victory in the election. The euro US dollar rallied to a high of US$1.12, its highest level in four months.
Boris Johnson and the UK Conservatives won the UK election with 363 seats compared to Labour’s Jeremy Corbyn’s 203 seats (2 seats still to be declared). The solid overall majority for the Tories means an end to the political paralyses that has gridlocked Parliament for the past three and a half years. For Brexit this almost certainly means Boris Johnson’s Brexit deal will be ratified allowing the UK to leave the EU with a deal in January.
Whilst the UK economy and the pound are the principal benefactors here, eurozone economies will also benefit from a Brexit deal and decreased levels of uncertainty. For this reason, the euro also rallied on the results.
The UK election data came following the European Central Bank rate announcement earlier in the day. As market participants had forecast, the European Central Bank kept policy unchanged. Instead euro investors looked towards the new European Central Bank President Christine Lagarde for clues over the direction of monetary policy. As a true politician she gave little away. It will take several more meetings for the markets to learn how to read her.
Dollar Drops On Improved Risk Sentiment
The US dollar was moving lower at the end of the US session on Thursday as the pound and the euro soared following the UK election vote and as investors moved out of the safe haven dollar.
Earlier in the US session reports also surfaced of a trade deal being agreed in principal between the US and China. The deal reportedly included the US cutting tariffs on $360 billion worth of Chinese imports by 50%. Currently the deal is still awaiting the signoff from President Trump, who had also tweeted that a deal was very close earlier in the session.
As global risks ebb, demand for the safe havens dollar also declined.
Today dollar investors will continue watching trade headlines. Retail sales data could also attract some attention.
|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 EUR = 1.12829 USD
Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.
Or, if you were looking at it the other way around:
1 USD = 0.88789 EUR
In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.