[vc_row][vc_column][vc_column_text]The mood towards the pound saw a dramatic improvement in the wake of the UK general election result, with markets encouraged by the prospect of reduced political uncertainty.

As the European Central Bank (ECB) showed no particular change in course at its December policy meeting the euro struggled to find support against its rivals last week.

However, the US dollar also came under pressure as the Federal Reserve failed to limit bets that an interest rate cut remains on the cards in the early months of 2020.

Both the Australian and New Zealand dollars found a degree of support, meanwhile, as the US and China reportedly reached a preliminary phase one trade agreement.

UK election result fuels fresh pound exchange rate gains

While markets had generally anticipated a Conservative majority this did not stop GBP exchange rates from rallying sharply in the wake of the general election result.

As the Conservatives increased their number of parliamentary seats the mood towards the pound improved as the risk of further political instability appeared to decrease.

The result also fuelled bets that a harder Brexit scenario could still be avoided, with backbench Conservatives now holding less influence over the leadership.

While December’s flash UK manufacturing and services PMIs both remained in negative territory, pointing towards a fourth quarter contraction, this failed to drive GBP exchange rates lower.

However, the pound may struggle to hold onto its positive footing in the days ahead if November’s UK consumer price index points towards weaker inflationary pressure.

Any easing in the inflation rate could increase the odds of the Bank of England (BoE) opting to cut interest rates in 2020, particularly if Brexit-based uncertainty continues to weigh on the economic outlook.

Even so, if the BoE opts for a less dovish tone at its December policy meeting GBP exchange rates could find a fresh rallying point on Thursday.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]To request an instant quotation on a currency quotation please click here

* Information courtesy of Currencies Direct, Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.

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