Pound nears $1.30 as weak dollar and election buoy GBP/USD
The pound jumped against the dollar in early trading today thanks to a weaker US currency and hopes of a Tory majority at the upcoming election.
GBP rose 0.34 per cent against USD to $1.297 as markets opened, buoyed by a weaker dollar due to the US Federal Reserve’s third cut to interest rates this year.
Read more: Traders see rocky ride ahead as sterling gains on election date
The rate cut left the dollar exposed to markets who quickly devalued the currency.
Sterling also gained against the euro, but to a lesser extent. GBP rose 0.207 per cent to 1.161 against the euro.
The prospect of a 12 December election failed to dim the pound, which in fact gained more as traders eyed the poll as a possible end to parliament’s ongoing deadlock.
“Expectations of a Conservative majority following the December election added further strength to the pound,” broker Liberum said.
A City PM analysis of recent polling found the Tories far ahead of Labour across the UK, with Prime Minister Boris Johnson’s popularity outstripping that of Labour leader Jeremy Corbyn.
Meanwhile the FTSE 100 opened up in early trading, climbing 0.27 per cent higher to 7,268 points after unexpectedly positive China PMI data pushed Asian stocks higher overnight.
Traders are awaiting UK manufacturing data at 9.30am today.
“Despite a modest pickup in September, the headline index remained below the key-50 mark for the fifth consecutive month,” Daiwa Capital Markets Europe said.
“And while the risk of a no-deal Brexit at the end of the month was eventually effectively taken off the table, persistent political uncertainty and soft global demand will have continued to hamper conditions in the sector.”
Yesterday the pound climbed to close above $1.29 after the Fed’s rate cut and gains look set to continue today.
It comes despite US President Donald Trump criticising Johnson’s Brexit deal yesterday. He told LBC it made a trade agreement with the US – something he’d promised over summer – less likely.
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The outspoken President also trashed Corbyn, saying he would be bad for the UK.
Corbyn responded that Trump was trying to help “his friend” Johnson.