According to a survey by ICM Research, Prime Minister Boris Johnson’s party is ahead of Labour by 42 percent to 35 percent, buoying optimism in the pound as investors expect a Tory majority on the December 12. With markets generally favouring a Tory majority due to the party’s promise to resolve Brexit uncertainty in January, the party’s high position in the polls is boosting the pound. In UK economic news, today saw the UK Markit Services PMI beat forecasts and narrow its contraction from 48.6 to 49.3, which provided a further boost for the pound to US dollar exchange rate.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was upbeat in his analysis, saying: “Despite this stagnation, a chink of light emerged amongst the services gloom as optimism for the future was the brightest since July 2019.
“With the advent of the New Year, firms were in a more hopeful mood that the trading landscape had to improve in 2020.”
The US dollar failed to gain on the stronger Sterling today, despite benefiting from its safe-haven status as uncertainty around a US-China trade deal increases.
This follows US President Donald Trump’s comment that a deal between the two superpowers could wait until after the 2020 presidential election.
Kyle Rodda, an Analyst at IG Markets, Melbourne, said: “The markets feel like trade talks are on a shot-clock now: December 15 being when the buzzer blows.
“Anything that remotely stands in the way of a deal getting done by then will be reacted to with anxiety.”
However, a slowing global economy could impinge upon the US economy, a prospect which is leaving some “greenback” traders feeling jittery.
We could see USD recover some of its losses, however, if the ISM non-manufacturing PMI for November beats forecasts later on this afternoon.
Looking ahead, the pound is likely to maintain its gains this week if the Conservatives continue to consolidate their lead in the election polls ahead of next week’s vote.