LONDON, U.K. – The British pound’s dramatic performance on and around the general elections in the U.K. might offer a playbook about what the European market will become in the upcoming year, 2020.
On Friday, the British pound was on its way towards their worst week against the U.S. dollar since two years ago. The recent performance of the currency turned the previous bull-run. It experienced following the exit poll that predicted the majority win for the Conservatives party led by Prime Minister Boris Johnson for the U.K. general election.
As expected during the election week, there was a rally election night for the pound as market players have increasing hope on a brighter political outlook. However, the sentiment was later on proven over-exuberant as the Prime Minister hardened his opinion regarding Brexit.
Global events added to the injury for the currency following the market’s enthusiasm over the developments of the initial trade agreement between the U.S. and China, which overturned with the lack of further detail on the transaction.
The pattern of the pound early in December could predict its performance in the year 2020, especially with the further jolts that the market is going to face moving forward, according to the Aberdeen Standard Investments’ head of global strategy, Andrew Milligan.
Although the anxiety and uncertainty regarding Brexit have reduced after the U.K. general election, Milligan said that the risks over Brexit are not 100% gone as more complex discussions lie ahead in the market. He further stated that positioning and valuating could boost the pound, and the momentum of the economy is starting to get choppy and weak but is still expected to recover next year, 2020.
The partial agreement to end the trade war between two of the largest economies in the world while the voting day in the U.K. was ongoing, it has helped the pound rally as global tensions revived the risk appetite of international investors. The breakthrough has taken away the massive global risks, which expected to provide support for U.K. assets.
Further, the outlook for the Bank of England’s monetary policy will be a crucial focus in the market ahead. The policy I expected to get some polishing in 2020 following Andrew Bailey replaces Mark Carney in position. On Thursday, however, the Monetary Policy Committee has decided to keep the interest rates unchanged, despite two out of its total nine members voted for a rate cut.