Conservatives Win Huge Election Victory
After six weeks of campaigning, the votes have been counted and the results are in: Boris Johnson’s Conservative Party has won a landslide majority. The Prime Minister heralded the victory a “stonking mandate” to deliver Brexit. During the campaign period, election optimism had caused the pound to US dollar rate to hit seven-month highs (around $1.32). It surged even further as news of the Conservatives’ triumph began to trickle through, breaking the 1.35 level for the first time since May 2018.
Mr Johnson’s gamble of calling a snap poll to try and unite the Brexit vote in leave-supporting seats across the country proved a masterstroke. Thereby providing him with the parliamentary platform he needs to take the UK out of the EU. The historic result should rid the political landscape of Brexit-fuelled uncertainty that has plagued it for so long, giving the GBP to US dollar rate the clarity it needs to build on its gains.
Fed to Keep Rates on Hold
The Us Federal Reserve (Fed’s) forecast that it would keep rates on hold through 2020, following its decision to leave borrowing costs unchanged in December, left the dollar licking its wounds after it dipped to its lowest level since August. Fed Chairman Jerome Powell believes the economic outlook for the nation is “favourable”. That said, the Central Bank only forecasts moderate and slowing growth through 2020 and 2021. Federal Open Market Committee figures showed that 13 of 17 Fed policymakers foresaw no change in interest rates until at least 2021.
Positive economic data has come thick and fast this week, indicating that the US economy is growing at a moderate speed rather than stalling. The latest figures released yesterday weren’t quite as upbeat, with news that producer prices were unchanged in November pointing to muted inflation despite a recent uptick in consumer prices. While Jobless claims rose by 49,000 to 252,000, as applications for unemployment benefits increased more than expected to a two-year high. Yesterday aside, this week’s data has provided a welcome relief for the dollar, with the ongoing US-China trade war and Fed rate forecasts shackling the currency recently.
As the dust begins to settle on the 2019 general election, investors in the pound will focus on Mr Johnson’s ability to deliver the pledge that formed the cornerstone of his campaign: “get Brexit done”
The pick of a deluge of data from the US today is Retail Sales (excluding Autos) and the Retail Sales Control Group release.
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