Pound gains ground against the dollar and euro

The pound recovered this afternoon against the dollar and euro as investors welcomed the likelihood of a General Election before Christmas.

Earlier today sterling had fallen towards a ten-day low against the dollar and was down at $1.2817 in early trading this morning, nearing its lowest level since October 17 having fallen 1.4 per cent from a $1.30 peak touched a week ago.

At around 4.45pm today sterling traded at $1.2886, while the dollar was weighed down by consumer confidence tests in the US, the euro also fell to 86.20 pence. 

The proposition of an early election could break the Brexit deadlock, which has steered many investors away from putting their resources into the UK.  

Experts have now said that the pound will likely stay fairly well supported unless a no-deal outcome becomes more than marginally possible once more.

Prime Minister Boris Johnson (pictured at Downing Street yesterday) will attempt to convince the Commons to vote for a December 12 election at his fourth time of asking today

Jeremy Corbyn said Labour would launch the ‘most ambitious and radical campaign for real change our country has ever seen’ now a no-deal Brexit was ‘off the table’. 

The new bill calling for a December 12 election only needs a majority of 320 in the 650-seat house, rather than the two-thirds majority he failed to win yesterday. 

David Cheetham, chief market analyst at XTB trading group, said: ‘Elections are often seen as bringing heightened uncertainty and therefore negative in the near-term for affected markets, but in this case there is a hope that it will bring an end to the present quandary we find ourselves in.’ 

This is while MUFG currency analyst Lee Hardman said if the Government gains a majority in Parliament, it could unlock further potential for gains for the pound, as the Brexit deal could be passed more easily.

He said: ‘From our perspective it’s difficult to see where the obvious downside risk for the pound is. We don’t see the No Deal risk going back to the table any time soon.

The pound is shown against the dollar over the past week, showing the decline in the currency

The pound is shown against the dollar over the past year, showing how it has fluctuated

‘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.’

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

Mr Johnson will attempt to convince the Commons to vote for a December 12 election at his fourth time of asking today using a short Bill which sets aside the Fixed-Term Parliaments Act, requiring only a simple majority of MPs.

However the Liberal Democrats and the SNP are reluctant to accept his date – fearing it allows time to bring the Withdrawal Agreement Bill before MPs ahead of the start of the campaign.

They have previously signalled support for a poll on December 9, but could put forward a proposal for an election on December 11 – which the Government is likely to accept. A No10 source said: ‘If there’s an amendment to the 11th we could accept.’