The Pound is seen trading softer against the U.S. Dollar on Tuesday, but is holding familiar levels against the Euro as a multi-week recovery is put on hold by the General Election campaign. With the campaigns underway, the PM Boris Johnson has challenged labour opposition Jeremy Corbyn to “come clean” about his Brexit stance, having accused him of wanting to go back to square one. Whilst on the other side, Nigel Farage yesterday announced he would field 600 MPs in the election, in an attempt to thwart Prime Minister Johnson's attempts at passing a Brexit deal. "Brexit Party leader Nigel Farage has said that his party could take votes from the Conservatives, resulting in a hung parliament. If the Brexit Party starts climbing in the polls, GBP upside could be limited as it will increase uncertainty," says Kim Mundy, a foreign exchange strategist at the Commonwealth Bank of Australia.
Key economic data to look out for today is the UK’s October Services PMI, which is due to release later in the European session at 0930 GMT, which is expected to come in at 49.7, down from September’s 49.5 reading. The 1.2925-30 region is likely to act as immediate strong resistance. On the flip side, immediate support is near the 1.2865 region, which if broken might turn the pair vulnerable to accelerate the slide back towards the 1.2800 mark. The US ISM Non-Manufacturing PMI is released later at 1500 GMT. Services PMI forecast to rise after September’s three year low. Manufacturing PMI recovered in October from decade trough but still weaker than expected.
GBP/USD is currently trading below 1.29, consolidating previous losses as it is weighed down by a combination of negative factors and election uncertainty. The Pound was further weighed down by the disappointing release of the UK construction PMI, which fell for the sixth consecutive month and came in at 44.2 for October. The reading was better than the previous month's reading of 43.3 but pointed to a continuous fall in the construction output and remained closer to the ten-year low level of 43.1 recorded in June.
EUR/USD is trading around 1.1135, consolidating its losses recorded late on Monday. After five consecutive days of a positive move, the EUR/USD pair witnessed some selling on the first day of a new trading week and was being weighed down by resurgent US Dollar demand. The US and China are nearing an accord that may include removing tariffs. In an interview with Bloomberg Television on Sunday, the US Commerce Secretary Wilbur Ross expressed optimism about a US-China trade deal and said that the licenses for American companies to export certain technology products to China’s Huawei would be issued very shortly. This comes on the back of the recent indications that a trade deal could be signed later this month and added to the growing trade optimism.
At the time of writing;
GBPUSD – Trading below 1.29 at 1.2896
GBPEUR- Trading below 1.16 at 1.1579
EURUSD- Trading at 1.1137
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