Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Pound Rally Passes Euro Milestone as Polls Back Conservatives

Published 09/12/2019, 09:55 pm
Updated 09/12/2019, 11:21 pm
Pound Rally Passes Euro Milestone as Polls Back Conservatives

Pound Rally Passes Euro Milestone as Polls Back Conservatives

(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.

The pound strengthened Monday to a fresh two-and-a-half year high against the euro, as weekend opinion polls continued to point to a win for the ruling Conservatives in this week’s general election.

The currency also rose against the dollar after polls in Britain’s Sunday newspapers all putting Boris Johnson’s party in the lead. Though the gap between the parties has narrowed throughout the campaign, it is not enough to keep the Conservatives from returning to power this week. The weekend surveys spurred buying by European investors, according to traders.

“The pound is rallying again after markets all but fully discount a good Tory majority,” wrote Elsa Lignos, global head of currency strategy at Royal Bank of Canada, in a research note. “Friday will show whether that was a good strategy or not.”

As well as gaining 0.3% to 83.93 pence per euro, it also added as much as 0.3% against the dollar to $1.3181 Monday. The pound has strengthened 3% against the U.S. currency over the past month, as investors grow increasingly confident of a win for Johnson in the December vote. Still, the cost of hedging against a fall in the pound has also surged as the election looms, showing lingering caution following the failure of most opinion polls to accurately predict prior votes such as the 2016 Brexit referendum.

The spot rate for the pound-dollar pair continues to diverge with options, as two-week risk reversals show increased demand to hedge an unexpected outcome from Thursday’s voting. A Bloomberg survey last month found the pound would fall to $1.27 on a Labour-led coalition outcome, a more than 3% drop from current levels.

Positioning on the currency also remains mixed, with leveraged funds slashing short positions to the lowest since May while asset managers have turned more bearish on the currency, according to the latest data from the Commodity Futures Trading Commission.

“The scope for surprise at this week’s general election is sizeable,” wrote Goldman Sachs (NYSE:GS) strategists including Alain Durre in a research note. “The share of voters that are still undecided- so late in the campaign- means that even a small swing in that slice of the electorate would lead to a hung parliament.”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.