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The pound rallied for a second day amid optimism a speedy resolution to the Brexit deadlock is in store after the Conservative Party’s election victory.
Sterling advanced against all its major peers after Chief Secretary to the Treasury Rishi Sunak said the government plans to put its Brexit legislation before Parliament ahead of Christmas to ensure the country will leave the European Union as planned at the end of January.
“With the Tories’ decisive victory, U.K. markets should quickly shift focus to the coming trade negotiations and spending priorities,” Audrey Childe-Freeman and Tim Craighead, strategists at Bloomberg Intelligence, wrote in a research note. “Sterling has room to keep running.”
The pound climbed 0.6% to $1.3415 as of 7:11 a.m. in London after surging as much as 2.7% on Friday to $1.3514, the strongest since May 2018. Sterling advanced 0.5% to 83.05 pence per euro.
The U.K. currency is being pushed higher by hedge funds, according to an Asia-based currency trader, who asked not be named because the person is not authorized to speak publicly. Most clients are confident U.K. Prime Minister Boris Johnson will successfully execute Brexit with the EU and reach a free-trade agreement with the U.S., the trader said.
A Citigroup Inc. index indicated currency funds have almost completely unwound their bearish bets on sterling.
Asian markets were mixed on Monday morning in Asia as U.S. Trade Representative Robert Lighthizersaid the phase one Sino-U.S. trade deal is “totally done,” but no date is set for the next phase two talks.
China’s Shanghai Composite slipped 0.1% by 11:35 PM ET, while the Shenzhen Component gained 0.6%. Hong Kong’s Hang Seng Index dropped 0.3%.
The phase one deal was agreed on Friday and the two nations are expected to official sign the partial accord in the first week of January,
On the data front, China’s industrial output rose 6.2% in November from a year earlier, versus a median estimate of 5.0%. Retail sales expanded 8.0% during the month, compared to a projected 7.6% increase. Fixed-asset investment was unchanged at 5.2% in the first eleven months, the same as forecast.
Japan’s Nikkei 225 traded 0.1% lower. The Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) edged down to a seasonally adjusted 48.8 in December from a final 48.9 in the previous month.
The index stayed below the 50.0 threshold that separates contraction from expansion for an eighth month.
South Korea’s KOSPI was little changed.
Down under, Australia’s ASX 200 surged 1.7% even after the country lowered its forecasts for wage increases, economic growth and budget surplus.