The British pound rebounded from a near nine-month high on Thursday as UK voters head to the polls in an election decisive for the future of Brexit.
Investors booked profits from a recent rally in case of a surprise UK election outcome later in the day. The forex market has bet on a Conservative Party majority, bolstering the pound in recent days. Market experts await such an outcome to lift Brexit uncertainty 3-1/2 years after Britain voted to leave the EU in shock referendum result.
After failing to deliver Brexit by an Oct. 31 deadline, Johnson called the UK voters to head to the polls to break what he cast as political paralysis. His main opponent, Labour leader Jeremy Corbyn, promised higher public spending, nationalisation of key services, taxes on the wealthy. Of course, another referendum on Brexit is on offer.
Investors have largely been focussing on the short-term dynamics of the election. However, it is the final Brexit outcome and progress in subsequent trade negotiations which will determine the pound outlook.
The sterling was 0.2% lower at $1.3169 against the dollar and weakened 0.3% to 84.62 pence versus the euro. The British currency hit a high of $1.3229 in early Asian trading, its highest since late March.
Sterling/dollar overnight implied volatility has soared to its highest since the 2016 Brexit referendum.
Voting ends at 2200 GMT, with exit polls and early results due after that. Traders expect an outcome as early as 0300 GMT on Friday.
START TRADINGForex – UK voters head to the polls for Brexit future
Βroader FX markets were quiet as investors moved to the sidelines.
The Fed announcement, which followed its decision to leave rates unchanged, sent the dollar to its weakest since early August. The dollar fell against a basket of currencies, its index falling 0.3% to 97.038, a four-month low. Among the currencies benefiting from the U.S. dollar’s slide were the Australian and New Zealand dollars.
The Canadian dollar edged lower against its U.S. counterpart on Thursday, trading 0.1% lower at 1.3185 to the greenback.
The Japanese yen held on to most of its overnight gains at 108.61.
The euro stood at five-week highs on Thursday before new ECB President Lagarde’s first policy meeting, after the Fed’s forecast that it would hold rates through 2020. But analysts doubt the ECB meeting will dislodge the euro from the narrow trading range it’s been in through 2019. The euro was up 0.1% at $1.1136 from Wednesday’s high of $1.1145, the strongest since early November.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money