13th December 2019 - UK parliament elections pushed the certainty and GBP higher

Walid Salah Eldin

Active member
The British pound spiked up versus its rival currencies by the beginning of the Asian session scoring to 1.3514 versus the greenback on the voting exit, as the indicators are referring to a materialized outright Tories' victory giving historical defeat to the labours who were paving for new Brexit Referendum.

It was strong will to help Boris Johnson to take UK from EU any way, after the progress he made in the last weeks following Theresa May's resignation.

The higher certainty is good for the markets and good for business spending to build on anyway even in EU which suffered for the uncertainty about Brexit too and that's why EURUSD rose too with the GBPUSD scoring 1.1199 for the first time since last Aug. 13, despite the ECB's waiting to see stance which is looking to be adopted for longer time than previously expected under Lagarde's new leadership.

The energy prices could be boosted too by the news which added to the market certainty, while the optimism is rising about a close by reached trade deal between US and China to avert imposing further 15% tariff on $156b worth of Chinese exports to US was scheduled to take place next Sunday.

WTI is getting closer to $60 psychological level waiting for more good news can make it more vulnerable to the upside in the coming hours.

The risk appetite rose significantly pushing USDJPY up for trading close to 109.50 during the Asian session, while S&P 500 future rate was scoring new all times high close to 3180, after surpassing during the US session its previous formed resistance at 3158.09 on the second day of this month, while the gold was diving below $1470 per ounce to touch $1462, following the UK parliament voting exit.

UST 10yr yield added more gains reaching %1.9444, after trading close to 1.80% by The FOMC rate decision last Wednesday which came as widely expected with no change keeping the Fed fund rate unchanged at 1.75% unanimously, after three consecutive cuts decisions by 0.25% taken by majority. The Fed looked more confident about the economy and that's why it avoided to say again that there is uncertainty about its outlook.

However the greenback came under pressure, following The Fed Chairman Powell's comments that he wants first to see significant and persistent inflation rising before raising rates, while the scenario for cutting rates will depend on a change of the future economic outlook which looked to the markets easier to take place.

The FOMC Members' forecasts showed that there is no plans for cutting next year and there could be one hike in 2021 and another in 2022. The committee said in its statement that the current stance of monetary policy is appropriate with no reference to further mid-term adjustments as it has done previously by the end of last October.

The committee stressed on the labor market strength and referred to rising of the household spending by stronger pace and repeated again that the business fixed investment and the exporting activity remain weak.

The Fed looked optimistic by The trade war de-escalation and avoided to show worries about the manufacturing sector weakness and the probability of its spillover the service sector.

The Federal Reserve Chairman Jerome Powell mentioned following last July. 31 meeting first cut since 2008 warning against expecting long U.S. monetary easing cycle naming that cut “mid-term policy adjustment”, before saying following last Sep. 18 cut "it was insurance against ongoing risks".

The Fed said by the end of October that only a "material reassessment" to the outlook will change the Fed's path of interest rates and in the same time he said also that only a significant rise in inflation would trigger a rate hike.

Now, it's looking more confident refraining from sending a signal about cutting again not just soon, but it is reluctant to send in the same time a signal about tightening showing that it is in no rush to change rates.

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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