Poll holds key to Sterling future

GBP

The weekend’s opinion polls continued to bolster the expectations of a Tory majority victory and the Pound pushed close to 1.3180 on the Dollar and 1.1905 on the Euro. A reluctance to extend long positions (bets in favour of the Pound rising) and slightly weaker risk appetite meant it edged a little lower later in the day. The derivatives markets showed a significant appetite for precautionary measures against losses. The Euro held above the 1.1900 mark and the Pound settled near 1.3150. 

UK GDP and industrial production releases are due this morning, although political developments will likely dominate. Also due out is the YouGov large-scale opinion poll. There is potential for choppy trading conditions on the release of the poll (or earlier if there’s a leak)  and any suggestion of “no majority” will likely trigger a sharp Sterling selloff.

 

USD

The US employment index strengthened slightly to 110.2 for November from 110.0 previously. The dollar was confined to narrow ranges with a reluctance to engage in fresh positions ahead of Wednesday’s Federal Reserve policy decision also a factor. There are no expectations of a rate cut this week and 2020 expectations will be very important for dollar direction. 

The dollar was unable to make headway while commodity currencies overall were little changed and against the Euro, settled around 1.1060.

 

 

EUR

The Eurozone Sentix index strengthened to 0.7 for December from -4.5 the previous month which was significantly above consensus forecasts and the first positive reading since May. The data maintained tentative optimism over a potential economic recovery in 2020. German bunds, however, gained during the day, even with the solid Sentix data and lower yields curbed potential Euro demand as yield spreads moved against the single currency.

The latest German ZEW investor confidence index will be released on today while there will be some caution ahead of Thursday’s ECB policy meeting. Narrow ranges prevailed in early trading with the Euro holding up around the 1.1073 mark against the Dollar.

 

 

Data to watch

09:30 – GBP – GDP

09:30 – GBP – Manufacturing Production

10:00 – EUR – German ZEW Economic Sentiment 

16:00 – USD – 10-y Bond Auction