GBP/USD Trades Cautiously Optimistic Ahead of December 12 Elections

The Pound is trading cautiously optimistic against the US dollar ahead of the upcoming general elections in the UK as markets eagerly await a Conservative victory and a subsequent resolution on Brexit. At the time of writing, GBP/USD is trading at around 1.315.

The Pound has gained around 2% against the US dollar since early November over rising expectations of a no-deal Brexit scenario being averted. GBP/USD is trading close to a seven-month high as opinion polls widely anticipate PM Boris Johnson to come back to power with a resounding majority to pass his Brexit Bill through the UK Parliament.

However, there is still an underlying sense of caution and nervousness among Sterling traders over a slight hesitation to believe blindly in opinion polls’ forecast. While some of the recent gains in the Sterling have been attributed to slashing of short positions in the currency, one-week implied volatility has doubled since late last week.

This is a sign of hesitation among traders to confidently trade the Pound in hopes of a Conservative majority as has been predicted. In the event of a Labour party victory, the Pound can reverse and weaken into the low 1.20s, as per traders’ estimates.