December 2, 2019 / 1:23 AM / 10 days ago

FOREX-Pound slips as polls tighten, optimism holds on trade front

* Pound drops as polls show tighter UK election race

* Rebound in Chinese manufacturing lifts Aussie, Kiwi

* Dollar advances slightly vs yen

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

By Tom Westbrook

SINGAPORE, Dec 2 (Reuters) - The British pound began the week on the back foot as polls showed a tightening U.K. election race, while an unexpected rebound in Chinese manufacturing supported risk appetite.

Sterling was a quarter of a percentage point lower at $1.2910 as a clutch of polls showed Prime Minister Boris Johnson’s Conservative Party losing some of its lead ahead of the Dec. 12 election, adding uncertainty.

“A decent Tory (Conservative) majority is in the price,” said Chris Weston, head of research at brokerage Pepperstone. “GBP remains a buy on dips here.”

More broadly, investors clung to hopes for a U.S.-China trade truce and cheered official data released over the weekend showing Chinese factory activity surprisingly grew for the first time in seven months in November.

The trade sensitive Australian and New Zealand dollars each rose more than 0.1%, with the Aussie buying $0.6768 and the kiwi $0.6439. The Chinese yuan was a tiny bit firmer at 7.0271 per dollar.

The greenback rose 0.1% against the Japanese yen to 109.66 yen and was steady against the euro at $1.1017.

The Aussie and the kiwi briefly unwound some gains after news website Axios reported that tensions in Hong Kong had become an obstacle to a Sino-U.S. trade deal, with talks likely to last at least another month.

“The market is taking it with a degree of salt, waiting for clarity,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.

“We keep on getting these unofficial statements,” he said. “No-one is going to be taking major positions until we get more clarity on the trade front.”

China’s Caixin manufacturing PMI, with a greater focus on smaller businesses, due at 0145 GMT may offer a more detailed economic picture, ahead of European and U.S. figures due later in the day.

However, official clarity on the future of the Sino-U.S. trade talks remains a key focus.

Axios’ report added to worries that U.S. President Donald Trump’s approval of a law backing anti-government protesters in Hong Kong could derail negotiations, as yet more demonstrations flared up in the finance hub over the weekend.

China warned the United States last week it would take “firm countermeasures” in response and said attempts to interfere in the Chinese-ruled city were doomed to fail.

China’s Global Times newspaper also reported on Sunday that Beijing’s top priority is the removal of existing tariffs on Chinese goods. (Reporting by Tom Westbrook; editing by Jane Wardell)

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