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November Currency Report

RIF FX November Currency Forecast

Electoral pacts, billions for the NHS, Scottish referendum promises and TV debates, we are well and truly in the midst of a general election battle that is by many, simply seen as a proxy second referendum. The latest poll from Kantar has the Tories ahead by 18 points and a yougov poll from last week has the Tories at a healthy 15 point lead.
Beyond December 12th forecasts are mixed with some expecting GBP to run higher towards 1.35, whereas others expect a knee jerk drop off. Ultimately should Tories gain the required numbers, this should be short term GBP positive.
GBP performance in the lead up to and post election in the past have been mainly good, however this is an entirely new environment and polls / patterns have been inaccurate before.
The Technical picture for GBP looks a little more precarious with a ‘Triple Top pattern’ forming on the daily chart. The Triple top pattern is symptomatic of an asset that fails to break higher, or the market does not have the requisite appetite for higher prices. typically this pattern precipitates a drop in the rate and then a consolidation period. This is not unexpected considering that the major driver for GBP will be the election result, therefore until we know the outcome traders are less inclined to take directional positions.

The immediate aftermath of the FED cutting rates for the 3rd time in 2019 was muted at best. It was clear that market had fully priced in the rate cut and had in fact moved on to assessing whether any more cuts were in the pipeline. Conclusions were drawn after Jerome Powell’s testimony that unless a significant shift were to occur in the US economy then no more cuts were coming. 
“The Fed has basically indicated ’we’re on hold for the time being unless there’s a major reassessment,” said Jon Hill, rate strategist at BMO. “Powell was clear a phase one deal had become baseline, or expected.
The major question for the Greenback is if the US-China phase one deal unravels, does this justify further easing from the FED?

Friday 22nd November

Euro Services &Manufacturing m/m
UK Services & Manufacturing m/m
US Manufacturing m/m

Wednesday 27th November

US Prelim GDP q/q

Aggregated Currency Forecast

GBPUSD (Spot, 3m, 6m, 12m+)

Analysts largely expect GBPUSD to remain contained throughout the election period before slowly increasing beyond 1.30 in Q2 2020
EURUSD (Spot, 3m, 6m, 12m+)

Euro growth is projected to remain stagnant Q1 & Q2 2020 before slowly improving in the latter half of the year.
GBPEUR (Spot, 3m, 6m, 12m+)

Despite recent gains GBPEUR is forecast to deteriorate from Q2 next year to around 1.13 – 1.16
Disclaimer: The currency forecast is a composition of leading banks and financial institutions. They do not represent a prediction from RIF FX and nor an inducement to trade.

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