Sterling edges higher ahead of election

GBP

The pound inched higher on Wednesday in very thin trading, shrugging off an opinion poll for Britain’s election that showed the ruling Conservative Party might fail to win a majority.

The narrowing of the Conservative’s lead just a day before the vote has cast some doubt on the expectations of a definitive outcome that has previously boosted sterling in recent weeks.

A closely watched model from pollsters YouGov put Boris Johnson on course to win a majority of 28 in Parliament on Thursday, down from a forecast of 68 last month. YouGov also said its model could not rule out a hung Parliament, where no party gains a majority.

A poll by research company Opinium on Wednesday said the Conservatives’ lead over Labour had narrowed to 12 points – a marginally better forecast than YouGov’s.

The pound has rallied in recent months on growing expectations the Conservatives would gain an outright majority, helping them pass a withdrawal deal with the European Union that was agreed in October – and ending over 3 years of uncertainty.

USD

The dollar nursed its steepest losses in weeks on Thursday, as the Federal Reserve’s forecast that it would hold rates through 2020 sparked an unwinding of long positions in the greenback.

Fed Chairman Jerome Powell said the economic outlook for the US was favourable as the Central Bank announced its decision to hold rates steady, as expected, though forecast only moderate and slowing growth through 2020 and 2021.

New economic projections showed 13 of 17 Fed policymakers foresee no change in interest rates until at least 2021.

Key Announcements

12.45 – EUR: Main Refinancing Rate; forecast to be kept the same as before at 0.0%.
12.45 – EUR: Monetary Policy Statement.
13.30 – EUR: ECB Press Conference.

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