Sterling sparkles after election poll Yuan up on trade deal reports
By Ritu,
The pound rose to a three-and-a-half year high versus the euro and the highest in more than a year versus the dollar after exit polls suggested a win for the Conservatives, which should help ensure the UK’s smooth exit from the European Union.
The Chinese yuan rose in offshore trade and the Japanese yen fell after a source told Reuters that the United States and China have agreed some tariff reductions and a delay on tariffs set to go effect on Dec. 15.
The early results suggest the election will relieve almost four years of uncertainty about when Brexit would take place, which should be supportive of the pound.
A successful scaling back of trade tension would relieve one major headwind to economic growth, which suggests lower demand for the safe-haven yen. Avoiding new tariffs should also be a boost to China’s slowing economy, which should draw more investors to the yuan.
Against the euro, sterling (EURGBP=D3) rose around 2% to as high as 82.80 pence, the highest since July 2016, which is shortly after the Brexit referendum that hammered the currency.
The pound surged by 2.2% to $1.3474, reaching the highest since May 2018.
The pound plunged more than 10% in the immediate aftermath of Britain’s vote to leave the European Union in June 2016, while $2 trillion was wiped off world markets.
The exit poll, which suggested UK Prime Minister Boris Johnson would get a majority of 86 – the largest of any Conservative leader since Margaret Thatcher won in the 1980s – should empower him to deliver Brexit on Jan. 31.
Official results will be declared over the next seven hours.
In the offshore market, the Chinese yuan rose 0.33% to 6.9273 per dollar, after surging on Thursday to the highest since Aug. 1 due to relief about a resolution to trade friction.
The yuan rallied and the yen fell late on Thursday after Bloomberg News reported that U.S. President Donald Trump signed off on a trade deal with China that will delay a new round of tariffs scheduled for Dec. 15.
The dollar index (DXY) against a basket of six major currencies fell 0.35% to 96.736, approaching the lowest since July this year.
