Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

GBP/USD surges, Brexit Party won’t contest Tory seats

Brexit champion Neil Farage boosts chance of Tory election victory by not challenging Tory seats. UK GDP data weak but recession avoided.

Cable shot higher in London trading after Brexit Party leader Neil Farage announced his party would not challenge Conservative Party seats in the upcoming December UK elections, thus substantially increasing the possibility that Prime Minister Boris Johnson can form a solid majority government.

UK third quarter economic data came in at 0.3 last quarter, as expected. Second quarter GDP was negative, so the UK has managed to avoid a recession but annual growth is running at just 1%, the slowest in almost a decade.

GBP/USD surged almost 1% on the Farage news, nearly hitting the $1.29 level before pulling back to around $1.2875.

UK monetary policy on hold during election

Bank of England (BoE) policy makers are unable to signal their reaction to the latest GDP data while the election campaign is ongoing. It is a tradition that BoE remain quiet during elections to avoid perceptions of bias.

Thus not only will there be no decision on any interest rate moves, but the BoE is unable to signal its intent through any public statements nor will any officials be giving speeches during the period.

It is unlikely that the BoE will move to adjust interest rates until January, but analysts say that Brexit developments will be in the fore when it comes to influencing cable, with economic and policy information taking a back seat.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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