FX Update

UK polls indicate Conservative win, China tariffs may be delayed

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The UK pound gained against both the dollar and the euro, as opinion polls indicate a victory by the ruling Conservative party in Thursday’s general election. The dollar index and US equities declined as traders adjusted positions ahead of several key central bank meetings this week. Reports hit the markets this morning that tariffs on Chinese imports will be delayed.

“A nation’s exchange rate is the single most important price in its economy; it will influence the entire range of individual prices, imports and exports, and even the level of economic activity. So it is hard for any government to ignore large swings in its exchange rate…”
Paul A. Volcker, former Fed Chairman who waged war on inflation, died December 8 at age 92
  • FX Rates
    December 10, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.

  • USD

    The dollar index edged lower in overnight trading, as traders adjusted positions ahead of meetings of the Fed, ECB, and Swiss National Bank – all are expected to hold steady. Several other central banks around the world also meet, including those of Brazil, Russia and Turkey – all are expected to cut rates. Equities are poised to open lower, 10-year bond yields dropped a point to 1.81%.


    In overnight trading, the pound reached an eight-month high versus the dollar and a two-and half year high versus the euro. Opinion polls point to a majority victory in Thursday’s general election by the ruling Conservative party, and an increased aversion to having Labor Party leader Jeremy Corbyn as prime minister.


    The euro edged higher, but faced headwinds from aggressive selling of the EUR/GBP cross ahead of the UK election on Thursday. Better-than-expected data out of Germany fueled demand for the currency. The closely-watched ZEW Indicator of Economic Sentiment by analysts (measuring their expectations for the next six months) increased to its highest level in nearly two years. The European Central Bank meets this week for the first time under its new president, Christine Lagarde. After easing monetary policy in September, no change is expected.


    The Canadian dollar is little changed overnight despite White House plans to sign the free-trade deal with Canada and Mexico today. The House of Representatives must then vote for final approval, which could take place as early as next week.


    The Chinese yuan moved higher as rumors hit the market that the US will delay the December 15 tariff threat by President Donald Trump, taking pressure off China for the time being to retaliate.

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Scott Petruska, CFA
Scott Petruska, CFA

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