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Weekly Report 4th – 8th November

GBP

GBP related pairs remain underpinned as polls indicate a Tory majority is the likeliest outcome. Politico projects Conservatives on 38% and Labour 26%; virtually unchanged from last week. The Brexit party has fallen behind a couple of points on 10% whilst the exclusively remain party, Lib Dems sit at 16%. Whilst an increasing Tory lead lends to GBP running higher, Bank of America Merrill Lynch Global research cautions against “directional spot views”, referencing the 2017 election and forecasted conservative majority which largely disappeared in the final couple of days before polling. GBP sensitivity towards opinion polls will also increase in the run up to polling day according to BAML research team, meaning that liquidity could thinner, therefore knee jerk and over exaggerated moves in GBP will not be uncommon.

Adding to the uncertain picture, it was reported on Friday that positional shorts (selling interest) in GBP was trimmed by 20,000 contracts. Given the political climate the only clue this can provide is that market participants are reluctant to bet one way or another and prefer a watch a wait mode, whilst GBP prepares for a volatile couple of weeks.

USD

The US economy delivered two surprises last week, a significant beat on employment numbers, indicating the robustness of the jobs picture, and an improvement on GDP, posting an 1.9% gain in the third quarter. The US Consumer, largely regarded as the powerhouse for US growth posted a 2.9% annualized consumption rate, beating expectations.  This upbeat news was tempered by the expected 25bps cut in the Interest rate by the FED, whom are clearly concerned about slowing global growth and a fragile US-China trade talks. The latter has struck a positive tone of late, but until trade deal 2.0 has been agreed and inflation remains at a sustained level then monetary policy, will remain accommodative and flexible according to Federal Reserve Governor Jerome Powell.


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