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Pound hits 31-month high as Conservatives hold election lead - business live Pound hits 31-month high as Conservatives hold election lead - as it happened
(32 minutes later)
Rolling coverage of the latest economic and financial news, as the Conservative party extends its lead over Labour Rolling coverage of the latest economic and financial news, as investors price in a Tory win in Thursday’s general election
Time for a quick recap
Sterling has hit fresh highs as the UK’s general election campaign enters its final stretch.
The pound broke over €1.19 against the euro today, for the first time since May 2017. Against the US dollar, it struck $1.318 - its highest level in seven months.
But the rally has now faded, as investors wonder whether recent opinion polling can be trusted. While Survation gave Boris Johnson a 14-point lead overnight, ICM’s latest poll have trimmed the PM’s advantage to just 7 points.
If ICM are right, Britain could find itself in hung parliament territory again on Friday morning. But if Survation, and YouGov, are on the money then Boris Johnson could sweep back to Downing Street.
Investors believe that a chunky Conservative majority would allow Britain to leave the EU in an orderly fashion by 31 January, removing the immediate risk of a cliff-edge exit. But it would also create a fresh deadline at the end of December 2020 for a new trade deal to be signed.
Connor Campbell of SpreadEx says
The shadow chancellor has tried to calm worries about a sterling crisis if Labour won a surprise victory. John McDonnell claimed there was more danger of the pound going up....
In other news:
Paul Volcker, one of the giants of central banking, has died aged 92. He’s been widely praised for his work tackling America’s inflation problems in the 1970s and 80s
Economic confidence across the eurozone has risen this month, to its highest level since the spring.
Shares in Africa-focused oil company Tullow have slumped by almost 70%, after it slashed production targets and shed two top executives
Over in New York, trading is subdued as investors brace for the next deadline in the US-China trade talks.
Washington is due to hike tariffs on $155bn of Chinese goods, including technology products, on 15 December unless a Phase One trade deal is agreed. Many analysts expect a delay, but the uncertainty is worrying Wall Street.
So, the Dow is down 31 points or 0.1% in morning trading at 27,984.
Here’s AP’s take:
Trade war jitters seem to be weighing on European stock markets today.
The main indices are mostly in the red as that 15th December deadline looms.
Data showing that Chinese exports fell again in November has disappointed some investors, as it implies the trade dispute with America is causing more damage.
Duncan Weldon of The Economist points out that Paul Volcker’s long, varied career went beyond simply running the Federal Reserve:
Whoever wins Thursday’s election faces many challenges, including how to fight the climate emergency while still raising living standards.Whoever wins Thursday’s election faces many challenges, including how to fight the climate emergency while still raising living standards.
Nobel Prize-winning economist Joseph Stiglitz reckons this conundrum can be solved, if policymakers focus on the ‘quality’ of growth in the economy:Nobel Prize-winning economist Joseph Stiglitz reckons this conundrum can be solved, if policymakers focus on the ‘quality’ of growth in the economy:
Back in the UK, another opinion poll has shown that the Conservative’s lead over Labour has narrowed.Back in the UK, another opinion poll has shown that the Conservative’s lead over Labour has narrowed.
It shows that Boris Johnson’s lead over Jeremy Corbyn has dipped to 6 percentage points, from 7.It shows that Boris Johnson’s lead over Jeremy Corbyn has dipped to 6 percentage points, from 7.
That’s a tighter race than other polls in recent days, such as YouGov (a ten-point lead) and Survation (14 points).That’s a tighter race than other polls in recent days, such as YouGov (a ten-point lead) and Survation (14 points).
And it’s weighing on the pound a little - much of this morning’s rally has now fizzled out.And it’s weighing on the pound a little - much of this morning’s rally has now fizzled out.
Reuters points out that Paul Volcker was no fan of the rise of the super-rich:Reuters points out that Paul Volcker was no fan of the rise of the super-rich:
They also talk about the ‘mystique’ that underpinned his work at the Fed, as he hiked interest rates painfully high:They also talk about the ‘mystique’ that underpinned his work at the Fed, as he hiked interest rates painfully high:
Economists, investors and journalists are offering their appreciations for Paul Volcker’s work:Economists, investors and journalists are offering their appreciations for Paul Volcker’s work:
He wasn’t infallible, though....He wasn’t infallible, though....
Newsflash: Paul Volcker, who ran America’s Federal Reserve through much of the 1980s battle against inflation, has died at the age of 92, according to the New York Times.Newsflash: Paul Volcker, who ran America’s Federal Reserve through much of the 1980s battle against inflation, has died at the age of 92, according to the New York Times.
Volcker was one of the most important central bankers to have steered monetary policy in recent decades.Volcker was one of the most important central bankers to have steered monetary policy in recent decades.
He ran the Fed from 1979 to 1987, first under Jimmy Carter and then Ronald Reagan’s presidency - a time of surging inflation. Volcker responded with sharply higher interest rates, to drive inflationary pressures down.He ran the Fed from 1979 to 1987, first under Jimmy Carter and then Ronald Reagan’s presidency - a time of surging inflation. Volcker responded with sharply higher interest rates, to drive inflationary pressures down.
The NYT says:The NYT says:
The recent rally in the pound is a blow to any hedge funds who have bet against the currency.The recent rally in the pound is a blow to any hedge funds who have bet against the currency.
Speculators have reduced their net short positions on the pound vs the US dollar to $2.44bn in the last week, Reuters is reporting. That’s down from a peak of $7.81bn earlier this year.Speculators have reduced their net short positions on the pound vs the US dollar to $2.44bn in the last week, Reuters is reporting. That’s down from a peak of $7.81bn earlier this year.
Jordan Rochester, Nomura’s currency strategist, has predicted that a Tory triumph could push the pound to $1.35 - not seen since May 2018.Jordan Rochester, Nomura’s currency strategist, has predicted that a Tory triumph could push the pound to $1.35 - not seen since May 2018.
Rochester says:Rochester says:
The FT has spotted that the cost of insuring against a tumble in the value of the pound has risen.The FT has spotted that the cost of insuring against a tumble in the value of the pound has risen.
That suggests some investors are nervous about the result of this week’s election, as a hung parliament would probably knock sterling lower.That suggests some investors are nervous about the result of this week’s election, as a hung parliament would probably knock sterling lower.
Rupert Thompson, Head of Research at Kingswood, says smaller UK companies could see their shares rally after a Tory win -- which looks probable, but not certain.Rupert Thompson, Head of Research at Kingswood, says smaller UK companies could see their shares rally after a Tory win -- which looks probable, but not certain.
In other news, the battle for takeaway company Just Eat rumbles on.In other news, the battle for takeaway company Just Eat rumbles on.
Amsterdam-listed Prosus has hiked its offer for the FTSE 100 firm, to over £5bn, which rival bidder Takeaway.com has dismissed as ‘derisory’. Here’s the latest:Amsterdam-listed Prosus has hiked its offer for the FTSE 100 firm, to over £5bn, which rival bidder Takeaway.com has dismissed as ‘derisory’. Here’s the latest:
Gambling site Betfair reports that the odds of a Conservative win have narrowed again today, to its lowest levels since 2017.Gambling site Betfair reports that the odds of a Conservative win have narrowed again today, to its lowest levels since 2017.
As chart shows, it’s now a 79% chance (based on wagers) while a hung parliament is roughly 19%.As chart shows, it’s now a 79% chance (based on wagers) while a hung parliament is roughly 19%.
Betfair spokesperson, Katie Baylis explains:Betfair spokesperson, Katie Baylis explains:
Labour’s shadow chancellor, John McDonnell, has denied that the pound would plunge if his party forms the next government.Labour’s shadow chancellor, John McDonnell, has denied that the pound would plunge if his party forms the next government.
Presenting his fiscal plans in London, McDonnell is asked what his plan is for a sterling crisis (something he said Labour was planning for back in 2017).Presenting his fiscal plans in London, McDonnell is asked what his plan is for a sterling crisis (something he said Labour was planning for back in 2017).
McDonnell insists that there won’t be a run on the pound, claiming:McDonnell insists that there won’t be a run on the pound, claiming:
McDonnell adds that the markets realised that Boris Johnson’s promises are neither “truth nor implementable”.McDonnell adds that the markets realised that Boris Johnson’s promises are neither “truth nor implementable”.
They are worried about instability, and very fearful about dropping off the edge within a year with a cliff-edge Brexit, he adds.They are worried about instability, and very fearful about dropping off the edge within a year with a cliff-edge Brexit, he adds.
McDonnell also invites us to “explore the recent history of the pound under the Conservative government” [reminder: it is still around 10% lower than before the EU referendum].McDonnell also invites us to “explore the recent history of the pound under the Conservative government” [reminder: it is still around 10% lower than before the EU referendum].
Back to the pound.... and Adam Cole of Royal Bank of Canada points out that sterling has already largely priced in a Tory victory.Back to the pound.... and Adam Cole of Royal Bank of Canada points out that sterling has already largely priced in a Tory victory.
That means there might not be much of a rally if Johnson wins a majority....and quite a tumble if he doesn’t.That means there might not be much of a rally if Johnson wins a majority....and quite a tumble if he doesn’t.
Cole writes:Cole writes:
If the UK bookies’ prices are a reasonable guide to market expectations for Thursday’s election, it is hard to see much more upside for GBP on the outcome. Betfair’s prices now imply almost an 80% probability of a Conservative majority government and that rises to 85% including a Conservative minority. At 15%, the probability of a Labour-led government is its lowest since the campaign beganIf the UK bookies’ prices are a reasonable guide to market expectations for Thursday’s election, it is hard to see much more upside for GBP on the outcome. Betfair’s prices now imply almost an 80% probability of a Conservative majority government and that rises to 85% including a Conservative minority. At 15%, the probability of a Labour-led government is its lowest since the campaign began
Taken together, the weekend’s polls suggest voting intentions have stabilised, with the Conservatives 10% points ahead on the raw data. As the second chart shows, the steady rise in Labour’s share appears to have stalled and their performance is now lagging, relative to the run up to the 2017 election. There is no “blackout” period in the UK, aside from polling day itself, and polls will continue to be published up to Wednesday night. YouGov will update their MRP model at 10:00 GMT tomorrow.Taken together, the weekend’s polls suggest voting intentions have stabilised, with the Conservatives 10% points ahead on the raw data. As the second chart shows, the steady rise in Labour’s share appears to have stalled and their performance is now lagging, relative to the run up to the 2017 election. There is no “blackout” period in the UK, aside from polling day itself, and polls will continue to be published up to Wednesday night. YouGov will update their MRP model at 10:00 GMT tomorrow.
Despite the confidence with which markets predict a Conservative victory, there are still several major uncertainties – turnout (particularly amongst younger voters), potential tactical voting and the large proportion of undecided voters that the polls still show.Despite the confidence with which markets predict a Conservative victory, there are still several major uncertainties – turnout (particularly amongst younger voters), potential tactical voting and the large proportion of undecided voters that the polls still show.
In another fillip for the eurozone economy, Germany has managed to grow its exports.In another fillip for the eurozone economy, Germany has managed to grow its exports.
German exports rose by 1.2% in October, beating gloomy forecasts of a 0.7% decline.German exports rose by 1.2% in October, beating gloomy forecasts of a 0.7% decline.
Sales to non-EU countries jumped by 4.5%, suggesting a pick-up in the global economy may be helping the euro area.Sales to non-EU countries jumped by 4.5%, suggesting a pick-up in the global economy may be helping the euro area.
Economists are encouraged by the pick-up in eurozone confidence this month:Economists are encouraged by the pick-up in eurozone confidence this month: