Macro Commentary

With less than a week until the election, the Conservatives continue to hold a healthy lead. However, with the polls having such a poor recent track record, uncertainty of course remains extremely high.

On monetary policy, the market is pricing in a 40% chance of an interest rate cut by the Bank of England in the first half of next year.

In the US, the China trade negotiations continue to dominate the headlines, with Trump suggesting he could wait until after the US elections next year, which weighed on stocks.

On the exchanges, the Tories lead in the polls continues to support sterling. Market analysts are calling for sterling to rally to 1.3500 against the dollar on a strong Conservative majority, and to test the 1.2000 level against the Euro.

GBP/USD is currently up to 1.3150, its highest level since May, though we expect some profit taking to come in around 1.3200. There is growing buying interest building now at the psychological 1.3000 level.

GBP/EUR has pushed up to 1.1850, its highest level since May 2017, with 1.2000 the next big level to focus on.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
10/12/19 UK Monthly GDP (3M/3M) 0.3%  0.1%
10/12/19 UK Industrial Prod. YoY -1.4%  -1.2%
10/12/19 UK Manufacturing Prod. YoY -1.8% -1.2%
11/12/19 US CPI YoY 1.8% 2.0%
11/12/19 US FOMC (Upper bound) 1.75% 1.75%

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7137 +6.59%
S&P 3117 +24.36%
EUROSTOXX 3648 +21.86%
DFM GENERAL INDEX 2694 +6.48%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1105 AUD/USD 0.6840
GBP/USD 1.3140 USD/AED 3.6730
GBP/EUR 1.1840 GBP/AED 4.8240
USD/CHF 0.9870 EUR/AED 4.0800
USD/JPY 108.60 XAU/USD 1474

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.78538% 2 year 0.82%
6 month 0.86663% 3 year 0.83%
12 month 0.97550% 5 year 0.87%

London

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