Sterling nudged higher yesterday but failed to test the key psychological levels on GBP/USD, with traders continuing to tread carefully in preparation for the general election and ensuing political propaganda. The surge in Sterling came after the most recent opinion poll indicated a strong lead for the Conservative Party in the forthcoming General Election, with the Labour Party and Liberal Democrats very close for second at around 20%. In addition, there are rumours circulating that Nigel Farage’s Brexit Party may be in the process of making a pact with the Conservatives which could see them withdrawing from over a hundred seats across the country allowing the Conservatives to push ahead. Later in the day, President Trump stated the US "can't make a trade deal with the UK" under Boris Johnson's EU withdrawal agreement, tempering Sterling’s momentum. Controversially speaking to LBC, the president said Mr Corbyn would be "so bad" as prime minister and that Mr Johnson was "the exact right guy for the times".
In addition, we have manufacturing reading from the UK but this is likely to be overshadowed by election talk.
Eurozone economic data
In Europe, the CPI inflation rate declined to 0.7% for October from a revised 0.8%. Whilst this is a disappointing trend the Euro failed to weaken as the ECB has taken remedial action in the form or restarting QE and the market is waiting to see what impact this has on inflation and growth.
US interest rate cut
President Trump continued to attack the Federal Reserve over its interest rate policies following the FOMC meeting on Wednesday evening. Currently the CME FedWatch is only pricing the chance of a cut in December at less than 20%. Economic data and trade disputes will be closely monitored for clues on future policy. In addition, the lower house of Congress voted along party lines to continue with an impeachment investigation into President Trump’s actions. This story is starting to gather momentum so could be watched closely for wider interest.
Looking to the day ahead, the key economic reading will be US employment data. The Non farm payrolls is expected to have weakened to its lowest level since March. Following on from Wednesday's rate cut and the potential pause in interest rates, the market will be keen to see if employment growth is slowing. In addition, we have manufacturing reading from the US.
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