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The pound rose towards a three-week high on Wednesday after Britain’s main opposition party said it would try to introduce parliamentary legislation to prevent a no-deal Brexit.

Investors are concerned the next prime minister could put Britain on course for a no-deal divorce with the European Union and send the pound plummeting.

Frontrunner Boris Johnson, a eurosceptic, has said he would be willing to take the nation out at the end of October, even if it meant leaving without a deal.

But Labour on Wednesday will debate a motion to seize parliamentary time on June 25 to give lawmakers the chance to introduce legislation preventing a no-deal Brexit.

“With the risk of a new leader with a new mandate behind a (somewhat) more unified Conservative Party, the opposition must make hay with mayhem while they can. By forcing this issue today, candidates must clarify where they stand on Brexit,” said strategist Helen Thomas, of Blonde Money.

A majority of lawmakers oppose leaving without a deal and other leadership contenders have warned parliament will block any attempt to do so.

The pound was up 0.2% at $1.2740, close to a three-week high of $1.2763 hit on Friday. It was flat against the euro at 89 pence. 

Sterling, which has been confined recently to a range of $1.26-$1.28, found some relief on Tuesday after British wages in the three months to April rose faster than expected.

Traders have largely ignored economic data releases in Britain recently, believing the Bank of England is unlikely to change interest rates until Britain decides how, when and even if it will leave the European Union. The United Kingdom is scheduled to exit the bloc on Oct. 31.

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Pound hits fresh seven-month high against dollar on UK election polls

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Evening view of the Houses of Parliament in Westminster, London.

Abachi | iStock | Getty Images

Sterling reached a fresh seven-month high against the dollar Thursday, apparently propelled upward by a belief that the upcoming U.K. general election will result in a majority for Prime Minister Boris Johnson’s Conservative Party.

The pound has risen 1.5% against the greenback over the past three trading days and on Thursday morning reached a high of $1.3146 — the strongest level since early May. Sterling is now above its 200-week moving average against its U.S. counterpart.

Against the euro, the pound firmed to 84.31 pence, the most since May 2017.

Global Fixed Income Strategist at Societe Generale, Kit Juckes, said sterling was going up “to the sound of shorts capitulating” in a reference to the growing number of traders who were removing bets against the currency.

Commodity Futures Trading Commission data, released each Friday, reveals that net shorts against the pound have been steadily falling since early August.

Currency traders appear to believe that a Conservative Party government, with a commitment to enact Brexit, will prove less damaging to the U.K. economy than a Labour-led government with a pledge to tax and spend.

With just one week until the election, poll-tracking data suggests that the Conservative Party is maintaining a 10-percentage point advantage over Labour. At least one political analyst has estimated that any number above 6% should translate to a Conservative majority in the U.K. Parliament.

U.K Finance Minister Sajid Javid told BBC radio on Thursday that there was not “a single doubt in my mind” that an “ambitious, deep, comprehensive, free-trade agreement” could be agreed with the EU after Brexit within a matter of months.

On Wednesday, the former House of Commons Speaker John Bercow argued that it was “utter nonsense” that any new government could complete Brexit quickly.

In a note emailed to clients Thursday, Swiss bank UBS said that if the Conservatives win and a Brexit deal is completed in early 2020, then the pound should rise to $1.35 against the U.S. dollar.

It warned that gains beyond this level would likely be capped by potential “pitfalls” in subsequent negotiations between London and Brussels.

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Euro zone growth curbed by trade, retail sales sharply

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Alexander Hassenstein | Getty Images News | Getty Images

The euro zone economy grew at a modest pace in the third quarter with a negative impact from trade, while retail sales fell at their sharpest rate this year in October, data showed on Thursday.

Gross domestic product (GDP) in the 19 countries sharing the  euro was up 0.2% in the July-September period, the same figure as the flash estimate released in October and unchanged from the second quarter.

Retail sales in the euro zone in October fell by 0.6%, double the amount expected in a Reuters poll, and were up a modest 1.4% year-on-year. The monthly decline was the steepest fall of 2019.

The data confirmed a somber outlook for the single currency bloc, which is facing threats and uncertainty over Brexit and rising global trade conflicts.

Britain had been set to exit the European Union at the end of October, a deadline since pushed back until the end of  January.

In trade, the United States outlined the first phase of a deal to end its conflict war with China in October, but the two  are still arguing about the details.

Year-on-year, euro zone expansion was 1.2%, also the same figure as in the second quarter of the year.

The bloc’s largest and third largest economies, Germany and Italy, grew by just 0.1% during the quarter, while in France, the second largest economy, growth was 0.3%.

Household spending was the strongest overall contributor, boosting euro zone growth by 0.3% percentage points, followed by government spending and capital investment at 0.1 points.

However, the contributions of trade and of inventory changes were negative, in the case of trade for a second consecutive quarter.

In the October retail sales figures, non-food sales declined, particularly online and mail order sales, although these tend to pick up in November and December ahead of the Christmas period.

Eurostat also said that the growth of employment in the euro zone slowed in the third quarter to 0.1% from 0.2% in the second quarter. Year-on-year the figure was also softer at 0.9% from 1.2% previously.

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Oil slips as OPEC+ prepares to discuss deeper output cuts

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A oil rigger at the Schlumberger field prepares pipes in Midland, Texas on December 16, 2008.

Kirk McKoy | Los Angeles Times | Getty Images

Oil prices edged lower on Thursday ahead of a key OPEC meeting where members are expected to weigh deeper output cuts in an effort to prop up prices and prevent a glut next year.

OPEC is seeking to extend production cuts of the group together with its allies led by Russia by more than 400,000 barrels per day (bpd) from their current 1.2 million bpd, sources told Reuters.

The Organization of the Petroleum Exporting Countries (OPEC) meets on Thursday in Vienna followed by a meeting with Russia and other producers, a group known as OPEC+, on Friday.

Brent crude futures were down 14 cents, or 0.22%, to $62.86 a barrel at 0845 GMT. Brent surged 3.6% on Wednesday.

West Texas Intermediate (WTI) crude futures fell 21 cents, or 0.34%, to $58.23 a barrel. They settled up 4.2% on Wednesday.

The OPEC+ group has been curbing output since 2017 to counter surging production from the United States, which is now the world’s biggest oil producer thanks to a rapid growth in shale oil output.

Next year, rising production in other non-OPEC countries such as Brazil and Norway threatens to add to the glut.

“We expect a constructive outcome to today’s meeting in terms of a prolongation of the deal, but are not yet convinced that a strong bullish surprise with a sizeable adjustment to the target level will really transpire,” Vienna-based consultancy JBC Energy said in a note.

Oil prices surged on Wednesday on expectations of deeper OPEC cuts and data showing a large drop in U.S. crude inventories last week.

Prices are, however, roughly where they were a week ago, before they plunged on a lack of progress on resolving a 17-month-old Sino-U.S. trade war that has hit weakened global economies and dented demand growth for oil.

U.S. President Donald Trump on Wednesday described trade talks with China as going “very well”, a day after saying it could take until after next year’s presidential election to complete an agreement.

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