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Brexit Party Reversal Sends GBP Swaggering Higher, Hits 6-Month High Against EUR

Published 12/11/2019, 05:27
Updated 21/10/2020, 09:15

Though a good chunk of its banks are now in the green, the FTSE was unable to ease its own losses thanks to an aggressive bounce from the pound.

Sterling’s hero came in an unlikely form on Monday: the Brexit Party. Nigel Farage announced that his single-issue group would not contest the 317 seats the Tories won back in 2017. Investors have read this move as one that makes it easier for Boris Johnson to secure a majority, the Conservatives now the one proper ‘Brexit’ option in a huge swathe of constituencies.

According to Spreadex’s general election markets, the Tories are looking at 336-344 seats against Labour’s 201-209, with the SNP and Lib Dems at 46-49 and 34-39 respectively.

Cable rocketed 0.7% higher after Farage’s reveal, surging towards $1.287 having fallen below $1.28 at the start of the session. Against the euro, meanwhile, sterling rose 0.6%, leaving it at a 6-month-plus peak of €1.1668. It didn’t hurt that the UK saw growth of 0.3% in Q3 – below the 0.4% forecast, but far better than the second quarter’s 0.2% contraction.

Ever the currency’s enemy, the FTSE wasn’t pleased with the pound’s burst of confidence. Add onto this a miserable set of commodity stocks, and the UK index was unable to shake a 0.5% decline, leaving it at 7320.

Elsewhere the Dow Jones continued to pull back from last week’s all-time highs. Losing hold of Thursday’s peak of 27750, the US index now sits at 27560, its patience with the confusing trade deal situation between Beijing and Washington dwindling. Optimism drove the Dow to its aforementioned record highs; but the positive headlines are gradually being revealed as a load of hot air, undermining the index’s recent growth. It needs something substantial if it is to stall its, admittedly rather mild, unwinding.

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