Increased nervousness over the election outcome triggered a significant Sterling move.
Narrow ranges continued to prevail on Tuesday as markets waited for key risk events. Equity markets registered slight losses with no definitive US-China trade developments.
The dollar was held in narrow ranges ahead of Wednesday’s Fed meeting. The Euro gained limited support from a stronger than expected German ZEW survey with EUR/USD held below 1.1100.
After pushing to fresh 7-month highs, GBP/USD corrected sharply lower as a key opinion poll indicated that the likely Conservative election majority had declined.
The German ZEW economic sentiment index strengthened to10.7 for December from -2.1 previously which was above consensus forecasts of 1.1 and the strongest reading since February 2018. The Euro-zone index also recorded a strong gain on the month, but there was only a slight improvement in the current German condition’s component. The Euro was able to post slight gains on the data, although there was no immediate EUR/USD challenge on the 1.1100 area as narrow ranges continued to dominate.
UK GDP for October was unchanged on the month and marginally below consensus forecasts with annual growth of 0.7% from 0.9% previously. UK industrial production increased a slight 0.1% for October, marginally below consensus forecasts while manufacturing data was marginally above consensus forecasts. Underlying growth at 10-year lows curbed Sterling support, although the reaction was limited and the UK currency gradually advanced.
Sterling traded higher at the European close with GBP/EUR retreating towards 1.1815 and GBP/USD briefly pushed to fresh 7-month highs above 1.3200.
The final MRP model opinion poll from YouGov indicated a Conservative Party majority of 28 compared with over 60 in the previous survey two weeks ago. Increased nervousness over the outcome triggered a significant Sterling move weaker and enhanced the technical correction from 1.32 resistance. There was a GBP/USD decline to near 1.3100 before a tentative rally while EUR/GBP moved towards 1.1815 before attracting buying interest with further choppy trading likely.
|13:30||USD CPI Ex Food & Energy (Y/Y)(NOV)||2.30%||2.30%|
|13:30||USD CPI Ex Food & Energy (M/M)(NOV)||0.20%||0.20%|
|13:30||USD CPI (M/M)(NOV)||0.20%||0.40%|
|13:30||USD CPI (Y/Y)(NOV)||2.00%||1.80%|
|19:00||Monthly Budget Statement(NOV)||-||-134.0B|
|19:00||USD FOMC Statement||-||-|
|19:00||FOMC Interest Rate Decision||-||1.75%|
|23:50||JPY Machinery Orders (Y/Y)(OCT)||7.90%||5.10%|