Boris Johnson and Jeremy Corbyn locked horns in the first live televised leadership debate of the general election campaign last night, with one newspaper describing it as a ‘bore draw’. The public certainly seemed evenly split over who had won the debate ‘with most Labour voters thinking Jeremy Corbyn won, most Conservative voters thinking Boris Johnson won’ according to a snap YouGov poll.

So, what were the main talking points that could impact the pound?

Brexit

Brexit is the cornerstone of the election campaign – in fact, it’s responsible for the whole thing happening in the first place. If Mr Johnson achieves his aim of breaking the Brexit deadlock in the coming weeks, the pound is likely to prosper. A majority victory for the Prime Minister could clear the clouds of uncertainty, shedding light on Britain’s future relationship with the EU. Here’s what they both had to say on the issue:

• Mr Johnson appealed to voters by outlining their options: ‘getting Brexit done’ with him or further ‘dither and delay’ with another EU referendum if Labour prevails.
• Mr Johnson maintained the UK will leave the EU on 31st January, ending what he described as ‘this national misery’, before claiming Labour offered ‘only division and deadlock’.
• Mr Corbyn replied: ‘The idea that the Prime Minister’s deal can be dealt with and finished by the end of January is such nonsense.’
• Mr Corbyn said Labour would ‘get Brexit sorted by giving you, the people, the final say’.

The Union

A member of the audience asked: ‘is the union worth sacrificing for Brexit?’ If Labour formed a coalition with the SNP, another Scottish referendum could be on the cards, triggering more political uncertainty that could weigh on the pound.

• Mr Johnson claimed that the result of a Labour-SNP electoral deal would be a second Scottish referendum.
• Mr Corbyn said ‘no deal will be done’ with the SNP.

Overall pitch

• Corbyn: the Labour leader’s rhetoric extended beyond just Brexit, as he made pledges about traditional election issues such as the NHS and climate.
• Johnson: the Prime Minister was keen to remind everyone that they were all there because of the deadlock and that only a Conservative majority could get Brexit done.

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USD

An increasingly divided Federal Reserve decided to hit pause in its easing cycle following a rate cut at its October meeting offered little guidance on what would cause policymakers to change their minds on the outlook, minutes of the central bank's last policy meeting showed.

The readout released on Wednesday of the Oct. 29-30 policy discussion, at which the Fed voted 8-2 to lower interest rates by a quarter percentage point, also showed policymakers further discussed the possibility of setting up a standing repo facility in the wake of recent ructions in short-term money markets.

Following the meeting, Fed Chair Jerome Powell signaled the Fed was effectively on hold with interest rates and said that would only change if there was a "material" change in the U.S. economic outlook.That phrasing, absent from the policy statement at the time, indicated that October's reduction in borrowing costs to a target range of between 1.50% and 1.75%, would be the last rate move over the short term.

In the minutes, there was little discussion of what a "material" reassessment would involve, bar two policymakers who wanted the Fed to make plain that another rate cut would be unlikely in the near term unless there was a significant slowdown in the pace of economic growth. Dallas Fed President Robert Kaplan has since said the price of his support was such a statement being made.

The Fed has one more interest-rate setting meeting before the end of the year, on Dec.10-11, but investors now see the Fed keeping interest rates unchanged until at least mid-2020.

GBP

British Prime Minister Boris Johnson said on Wednesday he planned a multi-billion-pound tax cut if he wins an election on Dec. 12, by raising the amount of earnings exempt from social security payments.

Workers currently pay social security payments — known in Britain as National Insurance contributions (NICs) — on annual earnings over £8,632, lower than the 12,000-pound threshold at which income tax becomes payable.
The Institute for Fiscal Studies, an independent think-tank, said the initial cut in the threshold would cost the government around 2 billion pounds in the next financial year.

Key Announcements

12.30 - EUR: ECB Monetary Policy Meeting Accounts

GBP

The Prime Minister doubled down on his Brexit promises on Tuesday, saying only he could take Britain out of the European Union quickly in a testy leadership debate with Jeremy Corbyn.

After the hour-long debate, polls showed the public were split over who was the victor: 51% said it was Johnson while 49% backed Corbyn - a result that analysts said reflected better on the Labour leader, who is trailing in opinion polls. Both leaders tried to undermine the other in the first debate before the 12th December election, called by Johnson to break the Brexit deadlock that has hurt Britain’s international standing.

Johnson is promising to implement the exit deal he negotiated with Brussels and lead Britain out of the EU by 31st January. He pledged to meet a 2020 deadline to secure a trade agreement for Britain’s long-term relationship with the EU. He took aim at Corbyn, saying his promise of a second referendum would only prolong Britain’s departure from the EU. Johnson prodded the opposition leader nine times to say whether his party would campaign to stay in the bloc or to leave at a new vote. Corbyn said he would honour the decision of the people.

To try to land a decisive blow in an election campaign which few voters relish, both leaders went on the attack, with Johnson trying to portray his rival as indecisive, while Corbyn questioned whether the prime minister could be trusted.

USD

The U.S. dollar edged higher against a basket of currencies on Tuesday, on pace to snap a three-day losing streak as continued lack of clarity about U.S.-China trade talks kept investors cautious.

The United States would raise tariffs on Chinese imports if no deal is reached with Beijing to end the trade war, U.S. President Donald Trump said on Tuesday, threatening an escalation of the spat that has damaged economic growth worldwide.

Investors are waiting for the release of minutes on Wednesday from the Federal Reserve’s latest policy meeting, where the central bank cut interest rates for the third time this year but signalled there would be no further reductions unless the economy takes a turn for the worse.

Key Announcements

19.00 - USD: FOMC Minutes

Last Week
GBP:

• Election dominating headlines.
• Some Brexit Party candidates are pulling out.
• Labour’s manifesto could weigh on pound.

USD

• USD stable after October consumer price inflation.
• Federal Reserve Chair has optimistic outlook.
• Phase 1 US-China trade deal optimism.

EUR

• Germany narrowly avoided recession.
• Economy grew by 0.1% in Q3.

Week ahead

• Friday manic with Eurozone data.
• ECB Head to speak at European Banking Congress.

GBP

The pound was boosted on Monday as the Conservatives have a healthy lead in the polls, increasing the likelihood that Boris Johnson’s withdrawal deal will be passed through Parliament before the January deadline. Yesterday saw the release of a poll that shows the Conservatives extending their lead over Labour to 10 points. As a result, the market is now moving to price in the likely outcome of a majority for Johnson.

However wild price swings are still expected, with spreads between one-month and two-month maturities at their widest levels since the June 2016 Brexit Referendum vote. The implied volatility gauges for sterling jumped to more than 11%, nearing doubling from levels of 6% earlier this month. The nature of this general election means traders are bracing themselves for the unexpected. Positions against the pound also fell to the lowest levels since May, meaning that the pound now has more potential to appreciate on good news than depreciate on the bad.

Key Announcements

None.