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Brexit Stalemate As Decision Expected By Sunday

Brexit Stalemate As Decision Expected By Sunday

GBP

The Pound strengthened significantly yesterday morning partly due to optimism that talks between Boris Johnson and EU Commission President von der Leyen could produce a breakthrough and push negotiators towards a deal within the next few days. Sterling peaked near 1.3480 against the Dollar and the Euro dipped below 1.1111. Political rhetoric was generally negative ahead of the meeting and the Pound’s gains gradually faded as caution prevailed. Warnings that London might move to the highest coronavirus tier due to an increase in cases also unsettle the Pound

Despite prolonged discussions, reports suggested that the meeting between Johnson and von der Leyen had not generated significant progress and that there were still large differences in positions. Discussions would continue over the next few days with a firm decision due by Sunday.

Sterling dipped lower overnight but attempted to stabilise in the early hours. UK GDP increased 0.4% in October, in line with the forecasts although production data was stronger than expected. The Pound opens just below 1.3350 against the Dollar while the Euro strengthened to 1.1037.

 

USD

US job-openings increased to 6.65mn for October from 6.49mn previously and slightly above consensus forecasts.

The dollar gained renewed support later in the European session, especially as equities started to lose ground, and commodity currencies also surrendered gains. In this environment, the Euro retreated to around 1.2060, although ranges were still relatively narrow.

 

EUR

The Euro has turned positive for the first time this week, as optimistic traders look to push the single currency back above the 1.2100 level in the run-up to the ECB policy meeting later today. 

Markets are still treading cautiously amid no breakthrough in Brexit talks while the Dollar remains on the defensive amid optimism over additional fiscal stimulus after passing a vote to a short term funding bill averting a government shutdown.

Euro bulls continue to draw support from hopes that EU leaders will approve a stimulus deal at today’s summit, paving the way for the flow of $2.2 trillion to the continent’s battered economies. This comes after Poland and Hungary lifted their veto in exchange for a delay in a sanctioning process that could strip them of access to the funds.

With the stimulus boost already being priced-in by the markets, the main market drivers will come from the central bank’s economic projections and President Christine Lagarde’s take on the appreciation of the single currency.

As of writing, the Euro currently trades just over the 1.2090 mark against its US counterpart. 

 

Data to watch

Day 1 – EUR – EU economic summit 

13:45 – EUR – Main Refinancing 

13:45 – EUR – Monetary Policy Statement

14:30 – EUR – ECB Press Conference 

14:30 – USD –  CPI

14:30 – USD –  Core CPI

14:30 – USD –  Unemployment Claims 

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