The pound was little changed today in Asia ahead of the first speech from the new head of the ECB.

Traders await new ECB head Christine Lagarde’s first official speech later today. 

The pound remained supported at 1.2936 as investors gambled on less risk of a hard-Brexit as the election campaign is already underway.

The New ECB President Christine Lagarde is to give her first speech over how best to respond to slowing growth in the bloc. 

Last Friday, Brexit Party President Party Nigel Farage threatened to field candidates in every constituency in the December 12th election, fighting Torys for every seat, if Prime Minister Boris Johnson refuses to abandon his deal with the European Union.

During a speech at the launch of his party’s campaign, Farage said the deal that Johnson agreed on October 17th “isn’t Brexit” and every voter will learn this before they go to the polls. According to Farage, Johnson has 13 days remaining to agree to his demand.

The pound was up 0.2% against a weaker dollar, trading just below the $1.30 benchmark, at $1.2961.

Analysts believe that pro-Brexit voters could be outnumbered by a full field of Brexit party candidates.

The release of PMI data showing an increase from 49.6 from 48.3 in September, its highest level since April, kept the currency steady. This was helped by a renewed rush to stockpile before the scratched Brexit deadline, which managed to help limit losses for British manufacturers last month.

Following the PMI release, UK gilt futures dropped around 10 ticks, laying below the halfway mark of growth and contraction.

Last month, the pound reached its best month in over a decade, as the currency rallied in the lead-up to the European Union summit that took place.

Indeed some of these gains were lost when Johnson failed to secure his deal’s approval in parliament. Luckily the decision to extend Brexit’s deadline allowed the cable to keep most of its gains.

Since last week, the spread between 2-month and 1-month GBPUSD implied volatility has grown from flat to 2.5 vols. This huge rise indicates that the FX markets anticipate more volatility for the cable around elections.


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Dalia Hilmi
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