Pound jumps the most in more than three weeks

The currency climbs after Nigel Farage promises not to contest Tory seats
Newsfeed12 Nov 2019
Photo credit: AFP Photo

Market news selected by the DBS Chief Investment Office

The pound rallied on increased conviction the Conservatives will win December’s election after Brexit champion Nigel Farage pledged not to fight the ruling party.

The currency rose the most in more than three weeks after Farage, whose Brexit Party could have split votes for the Conservatives, said he wanted to prevent a second Brexit referendum and pledged to concentrate his efforts on preventing Labour Party candidates entering Parliament.

The pound has rebounded to near USD1.29 since hitting a near three-year low in September, on the back of UK Prime Minister Boris Johnson finally managing to secure a Brexit deal. For now, markets are fixated on the 12 December election and ignoring most other developments, with volatility rising as the vote comes into view.

“This means the market will price Conservatives getting a majority at this stage,” said a strategist. “This is ‘pound higher by 1% today’ sort of stuff.”

The currency’s focus on politics above all else was once again on show Monday (11 November), as the pound barely reacted to UK gross domestic product growth, only to move close to 1% on the political developments. Strategists had said a coalition between the Brexit Party and the ruling Conservatives could have been the worst outcome for the pound, as Farage’s lawmakers would likely seek a more distant relationship with the European Union (EU) and even push for a no-deal Brexit.

Still, though the news is positive for the UK currency, it is not “a game changer”, according the strategist. Even if the Conservatives were to keep all their seats from last time, that would still mean a hung Parliament, and the Brexit Party still plans to stand in seats which were won by the opposition Labour party last time.

The pound climbed nearly 1% to USD1.2898, the biggest gain since 17 October, before finishing up 0.63% to USD1.2855. It also strengthened by 0.6% to 85.70 pence per euro after touching a six-month peak. – Bloomberg News.

The US Dollar Index (DXY) erased 0.16% to 98.200 on Monday, the euro gained 0.14% to USD1.1033, and the yen closed 0.19% higher at 109.05 per dollar.


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