Speculation Around The Potential of a Hung Parliament Sees Pound Ebb Slightly

With the General Election upon us and one day left for campaigning, the party leaders make their final push for votes. All eyes turned to the final YouGov poll released yesterday which, as many expected, showed that the Conservatives are on course for a small majority win. Their poll puts the Conservatives on 43%, which their model translates into 339 seats; Labour on 34%, with 231 seats; the Liberal Democrats on 12%, with 15 seats; the Greens with 3% and one seat and the Brexit Party on 3%, with no seats. The SNP are projected to have 41 seats, an increase of six on 2017, and Plaid Cymru are unchanged with four seats. However, despite still showing a Tory win, it will be a nervous 48hours as their majority was slashed from 68-seats to only 28 in the poll. The speculation around the potential of a hung parliament has seen the Pound come off slightly against both USD and EUR.

GBP/USD

The YouGov poll sent GBP/USD sharply lower shortly after hitting a new seven-month high at 1.3215. The pair is currently trading below 1.3150 after consolidating yesterdays losses. Investors would prefer a substantial victory for Johnson, one that would allow ratifying his Brexit accord and allow for business-friendly policies. Financial markets are wary of Labour leader Jeremy Corbyn's spending and nationalization plans – and also the uncertainty on the UK's exit from the EU.

Outside of the Election, UK Gross Domestic Product figures disappointed on Tuesday by showing no growth in October. The economy last expanded in July and the Bank of England may react to the news in its December 19 decision.

The Federal Reserve is set to release its rate decision later today. The Federal Reserve is set to leave interest rates unchanged after three consecutive cuts, whilst also providing GDP estimates for 2020 and 2021. Ahead of the Fed, the US releases inflation figures, with the Core Consumer Price Index set to hold at 2.3%.

EUR/USD

EUR/USD is seeing a typical pre-Fed decision caution trading so far this Wednesday, as Euro buyers take a back seat amid broad-based US dollar strength. The Fed is unanimously expected to make no changes to its monetary policy settings, keeping interest rates steady at 1.5-1.75%. However, Fed Chair Powell’s comments and economic projections will hog the limelight. Meanwhile, the European Central Bank (ECB) President Lagarde, at her debut rate-setting meeting this Thursday, is expected to back ECB’s commitment to the recent stimulus package that included a rate cut and the restarting of quantitative easing (QE) program.

At the time of writing;

GBPUSD – Trading below 1.3150 at 1.3140

GBPEUR – Trading above 1.18 at 1.1855

EURUSD – Trading at 1.1083

The figures are based on the live mid-market rate, correct as of 08:30 GMT on 11/12/2019, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

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