The snap general election on 12 December was given the go-ahead last week after it received the necessary backing from MPs and the House of Lords, before being given Royal Assent. Parliament will officially be dissolved shortly after midnight on Wednesday and suspended from the start of the following day, triggering the campaign period before the polling date. While the following five-weeks will have a huge influence over the performance of the pound, we’re not likely to see many political developments next week outside of what we already know: that the Conservatives currently hold a lead in the polls. This has the potential to create volatility for the pound to us dollar rate.
The latest opinion poll in the Observer shows Mr Johnson holds a comfortable 16-point advantage over Labour. The larger the lead for the Conservative party, the better for the pound, which will benefit from any suggestion that Mr Johnson will win with a comfortable majority and can pass his deal unimpeded.
Economic data holds back the GBP vs USD pair
The US dollar benefitted from stronger-than-expected US jobs data on Friday. Non-farm payrolls rose 128,000 in October, much stronger than the 89,000 forecast by economists, as the US economy added more workers than expected. While in the UK, the pound was held back by disappointing Manufacturing PMI figures. Both readings contributed to the drop in value of the GBP to USD pair at the end of last week.
The US Institute of Supply Management (ISM) releases its latest manufacturing business survey result – also known as the ISM Manufacturing PMI – on Tuesday. Forecasts suggest it will record a modest recovery in manufacturing sector activity, marking the third consecutive month of contraction. Before that, we receive Markit Services PMI data from the UK, which is forecast to record a slight rise – a higher than expected reading is typically considered to be a positive outcome for the pound.
On Thursday the Bank of England releases the minutes from its latest policy meeting, which will provide updated economic forecasts as the campaign period for Britain’s first December general election since 1923 kicks off. The UK’s central bank isn’t expected to announce a change in policy or interest rate settings, but there is mounting speculation that its accompanying statement may hint at a shift to a more neutral stance due to weaker growth.
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