GBP slips on U.K. poll projections, as USD eyes the Fed

By: Andia Rispah
Andia Rispah
Andia Rispah is a Personal Finance & Investment Writer who helps Financial Advisors to create valuable content to help… read more.
on Dec 11, 2019
  • GBP dropped after a poll showed a narrowing lead for the Conservative Party in the election later this week.
  • The USD movement looked to the Fed's policy meeting.
  • Traders expect the Fed to leave the rates unchanged on Wednesday

On Wednesday, during the early trade, the GBP dropped after a poll showed a narrowing lead for the British PM Boris Johnson’s Conservative Party in the election later this week.

The USD movement looked to the Fed’s policy meeting.

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Investors are also paying attention to what the U.S. President Trump will do with the U.S. tariffs due on Dec 15. Trump intends to impose more tariffs of nearly $160 billion worth of Chinese consumer goods.

Investors have generally hoped and believed that Trump will either postpone or roll tariffs back to salvage a trade deal between the U.S. and China.

It is calmness before the storm. Markets have long believed the additional tariffs will be avoided,” said Ayako Sera

Ayako is the market economist at Sumitomo Mitsui Trust Bank.

The GBP dropped 0.25% to $1.3122, giving back a cent after hitting an 81/2-month high of $1.3215 on Tuesday.

It also slipped to 0.8455 pounds against the euro, off its 2 1/2-year high of 0.8394 touched earlier this week. 

On the yen, it traded at 42.77 yen, down from Tuesday’s seven-month high around 143.39.

Polls showed Boris was on course to win the majority of 28 in parliament at the Thursday’s election, down from a forecast of 68 last month.

The GBP had rallied for the past couple of months on rising expectations that Johnson will secure an outright majority in parliament after Dec 12 to end Britain’s political paralysis over Brexit since 2016.

Dollar eyes the Fed meeting

The USD traded at 108.80 against the yen, flat after a gain of 0.15% the previous day.

It drew its strength from the Wall Street Journal report of officials from both the U.S. and China saying the groundwork was on course to push back the Dec 15 tariff deadline.

One person briefed on the situation, saying Trump and the White House’s top economic and trade adviser would meet in the coming days over the case.

Economic uncertainties stemming from the US-China trade war prompted the Fed Reserve to cut rates three times this year.

Traders expect the Fed to leave the rates unchanged on Wednesday unanimously.

Fed policymakers project that the U.S. economy and interest rates will remain in focus to assess whether they think rate cuts so far adequate to keep the economy on course for another year.

The euro stood at $1.1092, after rising 0.23% on Tuesday following the ZEW research institute’s monthly gauge on economic morale among investors in Germany. The research showed improvement far beyond that of December.

The index rose to near a two-year high of 10.7 from -2.1 a month earlier, exceeding even the highest forecast in a Reuters poll of economists. The unexpected rise in October exports boosted hope for the upturn in Europe’s biggest economy.

The euro’s strength helped to push down the dollar index to 97.515, not far from a one-month low of 97.350 touched on Friday.

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