Sterling rises after election poll, yuan up on trade deal

Andrew Cummings
December 13, 2019

The pound was trading at 1.3513 against the US dollar and 1.2067 against the euro, up by 2.40 and 1.77 percent respectively.

The pound gained sharply yesterday to hit a two-and-a-half year high against the euro and a level rarely seen since the Brexit referendum in June 2016.

The pound strengthened versus the euro to 83.94 pence EURGBP=D3 , its strongest level in 2-1/2 years.

British pound soared on Thursday night after an exit poll suggested the Conservatives are on course to win a massive parliamentary majority in the country's election.

The British currency rose as implied volatility gauges for one week have fallen to their lowest in almost two years, with investors, like UBS Wealth Management, offloading protection against unexpected moves in the pound, pushing the price for options lower. "The most important thing with Brexit is not the way we divorce, it's what we build afterwards".

Capital Economics chief United Kingdom economist Paul Dales has said, "If the Conservatives do win a majority, passing a Brexit divorce deal in the coming weeks could eliminate any risks of a no-deal Brexit on January 31, decrease the direct uncertainty and lift business investment at least a bit".

The incumbent prime minister Boris Johnson is headed for a clear majority, according to a Reuters exit poll.

The Conservative and Unionist Party to which Johnson belongs has won 109 seats out of the 223 seats for which the results have been discussed as of press time.

The USD sold off strongly in the risk-on mood of expecting a China-US deal to finally happen, this was maybe a bit premature given the silence from the Chinese side and could eventually lead to a strong turnaround if China does not take the deal.

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