Conservative majority prediction reassured investors
Sterling began the week 0.7% higher against a basket of currencies compared to the previous week, including a gain of two thirds of a cent against the euro. Primarily the rise was due to growing confidence in the result of various opinion polls which suggest that the Conservatives will retain power and have the majority required to press ahead with their Brexit plans, putting an end to the uncertainty. It wasn’t the only reason the pound had a good week. While the BRC reported a -4.9% annual decline in like-for-like UK retail sales, seasonally adjusted figures to take the timing of Black Friday into account suggested stronger growth in November than previous months. In addition, the UK services sector PMI came in at 49.3 – half a point higher on the month and edging closer to the 50 breakeven level. The air of optimism helped sterling break through technical resistance against the US dollar at $1.30 and make gains against the euro and Australian dollar in the wake of its gains against the greenback. Next week is likely to be a tricky one for the pound, and will depend on whether the market can hold its nerve and maintain its optimism as the date of the General Election draws closer.
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