The UK general election on Thursday and a tentative US-China trade deal dominated the news last week and sent global risk appetite higher, with the S&P 500 closing at a new all-time high of 3168.80 on Friday.
In the UK, the ruling Conservative Party, which had lost its parliamentary majority in the June 2017 election, secured a convincing win. Prime Minister Johnson’s party, which had 298 seats going into the election, won 365 seats in the 650 seat House of Commons, a majority of 80 seats – the largest Conservative majority since Margaret Thatcher secured a 102 seat majority in the 1987 election. The opposition Labour Party, which had 243 seats, lost 41 to secure only 202 seats – its worst performance in 80 years.
Sterling rallied forcefully in late trading on 12th December as the first results were declared, with the GBP/USD cross temporarily trading through 1.35 for the first time since May 2018. However, it has since given back some of its gains with GBP/USD trading around 1.335 at time of writing. In trade-weighted terms Sterling is up 1.5% since before the election but still 8% below it pre-referendum level.
The Dollar shed 0.7% last week, with markets moving out of the Dollar into more risk-sensitive currencies in the wake of a partial trade agreement between the US and China.
The safe-haven Swiss Franc was broadly unchanged in trade-weighted terms, as was the Euro, New Zealand Dollar and Australian Dollar. The Eurozone composite PMI was unchanged in December at 50.6, according to data out this morning, pointing to stable but weak GDP growth in Q4.
