The GBP/USD exchange rate was steady at nine-month highs today, trading at $1.321. Markets seem to have priced in a Conservative Party win in today’s general election.
‘Support for Conservatives is almost back to the level it enjoyed in 2017, thanks not least to its ability to secure the support of over half of all those who voted Leave in 2016.
‘In contrast, Labour is at risk of seeing all the gains the party made in 2017 reversed, raising fresh questions about the party’s long-term future north of the border.‘ Professor Sir John Curtice commented.
He is the Professor of Politics at the University of Strathclyde.
With today’s setting the tone for the next five years of Brexit and economic policy, expect the GBP to stay as long as the markets price in the Conservative victory.
However, any signs of a hung in parliament would weaken the Pound on heightened uncertainty around the Brexit and the economy going forward.
Fed signals long policy pause
As the USD held steady against the GBP following yesterday’s Fed’s decision to keep interest rates at 1.75%.
However, Jerome Powell, the Fed Chair, signaled a long policy pause through 2020.
‘It’s ‘steady as she goes’ from the Fed today – the statement provided little ground-breaking news on the path of monetary policy. The prevailing message out of today’s meeting is that the Fed remains on hold, barring any material upside surprises for inflation.’ commented Jason Pride.
Jason Pride is the Chief Investment Officer at Glenmede Trust Co., commented.
Today we also expect to see the release of the US PPI figures for November, with the USD likely to ease against the GBP if producer prices slow as forecast.
Next will be the US Initial Jobless Claims figure for December, which is forecast to increase from 203,000 to 231,000.
What if the Labor Party wins?
Political developments will continue to drive the GBP on Friday based on today’s election outcome.
If the Labor Party wins or there is a hung in parliament, the GBP/USD could sink on the heightened uncertainty because the markets have already priced in the Conservative win.
The USD investors will be looking ahead to tomorrow’s release of the US Retail Sales Control Group figure for November, which is expected to hold steady at 0.3%.
However, any signs of improvement ahead of Christmas would provide some uplift for the USD/GBP exchange rate.