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Holding horses

​​​​​Today's news headlines:

  • ‘China sees US delaying Dec 15 tariff hike as talks drag’. Chinese officials are expecting Trump’s December 15th tariffs to be delayed as both parties attempt to close the trade deal that is allegedly close to being agreed. Thus far, the Trump administration has not sent a clear signal to suggest a delay of the $160 billion tariffs on consumer goods. (Bloomberg)
  • ‘Markets stare into the dark before Lagarde’s first decision day’. Tomorrow’s ECB’s policy decision will be the last of 2019 and Christine Lagarde’s first as ECB President and markets are showing no clear prediction of the direction of future interest rates. Over the last five weeks, Lagarde has called out for fiscal support from Eurozone nations but given no suggestion on her monetary policy views. Tomorrow could mark the start of markets pricing in the 2020 interest rate path. (Bloomberg)

A shrinking lead

Well folks, we’re on the cusp of one of the most important general elections in some decades. It’s the sort of election that could finally bring an end to the uncertainty that has plagued Britain and its economy since June 2016. For us, it’s been clear since August that markets expect Boris Johnson to settle down at 10 Downing Street for the next few years, evidenced by an almost 10% increase in Sterling against the Dollar. A decisive win for Johnson’s Conservatives should support the Pound further into the mid 1.30’s, with most proximate risk manifesting towards the end of 2020, when the UK’s transition period with the EU is currently set to end. If the UK fails to agree on a trade deal with the bloc by then, we could find ourselves back on the brink of a hard-Brexit.

Unfortunately for markets, last night’s highly anticipated YouGov poll revealed that the Tory lead has narrowed by more than half. The MRP poll predicts that the Conservatives will now win 339 of the 650 seats compared to 359 less than two weeks ago, giving them a majority of just 28 seats. Perhaps the most striking detail from the poll is the forecasted outcome falls within the margin of error. YouGov’s political research manager, Chris Curtis, said that ‘as things currently stand, there are 85 seats with a margin of error of 5% or less’, which opens the door to a significant swing in either direction on the day. While markets may get a little spooked at this release, it could play into the Tories’ hands, because Johnson is fiercely keen to avoid any voter complacency in the run-up to the vote.

Bottom line: It’s important not to get carried away thinking a large Pound move will come out of a Conservative victory tomorrow. We are unlikely to get anywhere near post-referendum high of $1.43 in the near-term as the UK’s economic indicators aren’t exactly stellar. We should always be mindful of the rocky Brexit road ahead of us, there’s a lot of work still to be done. 


Cable fell from an eight-month high overnight as the latest YouGov MRP poll showed a falling Conservative majority. Despite the increasing uncertainty surrounding this week’s UK general election, the pair has managed to hold onto most of December’s gains. This evening’s Federal Reserve policy announcement is unlikely to affect the pair as UK political uncertainty overshadows.


The currency-cross fell overnight as Sterling weakened in response to the latest YouGov election poll. The pair has briefly broken the 1.19 level three times this week but trades comfortably below the key level amid growing political uncertainty in the UK. The Euro is trading flat ahead of tomorrow’s monetary policy decision meaning Sterling is likely to drive the pair throughout today’s session.


The pair continues to trade between 1.10 – 1.11 before the ECB makes its final policy decision of the year and Lagarde makes her first decision as President. The pair has been supported by its 50-daily moving average this week which currently sits at 1.1061. Today’s US data and the Fed’s policy decision this evening could cause the pair to test its recent boundaries.