Sterling at 10 day low as Johnson pushes for election

Last Updated : 29 October 2019, 10:25 IST
Last Updated : 29 October 2019, 10:25 IST

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Sterling fell towards a 10-day low on Tuesday, nearing $1.28 against a broadly stronger greenback as investors waited for UK Prime Minister Boris Johnson's next attempt to push for a general election before the end of the year.

Johnson is expected to force a bill through parliament calling for a Dec. 12 general election. The new bill only needs a majority of 320 in the 650-seat house, rather than the 2/3 majority he failed to win on Monday.

The pound was trading at $1.2817 versus the dollar, nearing its lowest level since Oct. 17 and down 0.3% on the day having fallen 1.4% from a $1.30 peak touched a week ago.

Versus the euro, the pound was trading flat around 86.35 pence.

"The expectation is that (Johnson) should be able to get the vote passed in Parliament today for an early election," said Lee Hardman, currency analyst at MUFG, who expects the pound to strengthen modestly when the bill is approved.

Hardman said that if the government was able to gain a majority in parliament that could unlock further potential for gains for the pound, as the Brexit deal could be passed more easily.

"From our perspective, it's difficult to see where the obvious downside risk for the pound is," he said.

"We don't see the no-deal risk going back to the table any time soon. Even if the government doesn't do as well (in the election), that would increase the influence of the opposition parties who want an even softer deal," he said.

However, Commerzbank analyst Thu Lan Nguyen said in a note that the uncompromising approach of different camps within parliament creates the risk of constant postponement of Brexit, which would damage sterling over the longer-term.

The debate on the bill will begin in the early afternoon, London time. The government has proposed it will be completed no longer than six hours later.

Implied volatility gauges with three-month maturities - encompassing the date of the proposed election - eased to their lowest level in three months.

Published 29 October 2019, 10:13 IST

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