Brexit Progress Supports Sterling

GBP

Sterling is looking to regain ground above the 1.3000 level, holding onto overnight recovery gains following a sharp drop to lows of 1.2916 against the Dollar. The UK currency witnessed a good flurry of activity yesterday having fallen nearly 1.5% during the European session as further coronavirus lockdown fears triggered risk aversion and bolstered the safe haven Dollar demand. 

The US session however, did see the Pound recapture the 1.3000 level on headlines that both UK and EU negotiators have made progress towards resolving a number of big and important factors in the Brexit talks. The renewed optimism raised hopes of an agreement by early November and rescued Sterling bulls. UK Trade minister Liz Truss will later today set out the principles that will underpin Britain’s future trade policy with the EU and the US. 

Despite the rebound, the further upside appears elusive, as markets are weighing in chances of a UK lockdown, especially after the UK reported 24,701 new COVID-19 cases.

USD

The US Dollar is holding gains against a basket of major currencies today as escalating coronavirus cases in Europe are increasing investor fears that fresh lockdowns restrictions would further hit the already fragile economic recovery.

Traders are braced for a volatile Dollar with the US election less than a week away.  While the country, like Europe are also facing an increase in coronavirus infections, former Vice President Joe Biden has consistently been leading the polls over President Donald Trump.  Markets are cautiously betting on his victory and a possible “blue wave” outcome, where Democrats control both chambers of Congress.

On the docket today includes U.S. third-quarter Gross Domestic Product. Analysts are expecting an up tick but not enough to make up for the pandemic impact. 

 

EUR

Having declined for its third successive day yesterday, The Euro is now looking like taking a breather against its US Dollar counterpart. Any relief however, could be short-lived, as the European Central Bank is expected to maintain a dovish tone during today’s policy meeting review. 

The pair is currently trading just above the 1.1730 which is also housing good previous support from September and also early October. A break below would imply an end of the corrective bounce and will likely invite stronger selling pressure. 

Both France and Germany have reimposed lockdown restrictions. The latest measures are less severe than the ones initiated in April. But enough to bring a possible fourth-quarter gross domestic product contraction. As such, the ECB will be under more pressure than ever to boost stimulus. Should the Central bank however lay the grounds for a December move, a sell of will likely gather pace.  

 

Data to watch

All Day – EUR – EU Economic Summit 

13:30 – USD – Advance GDP

13:30 – USD – Advance GDP price Index

13:30 – USD – Unemployment Claims

13:45 – EUR – Main Refinancing Rate 

13:45 – EUR – Monetary Policy Statement

14:30 – EUR – ECB Press Confidence 

15:00 – USD – Pending Home Sales