Deal or No Deal – Boris Decides
Sterling came under renewed selling pressure yesterday and erased the previous day’s gains to move from one-week lows. The Pound was being pressured by the introduction of new coronavirus lockdown restrictions in the UK, a strong pickup in the Dollar demand and the ever present yoyoing of the trade agreement with the EU.
The intraday bearish pressure for the UK currency picked up after EU leaders called on the UK to make further concessions to secure a deal. EU chief negotiator Michel Barnier, reiterated a level playing field, fisheries and issues of governance remained key sticking points holding up progression on any agreement. The comments drew criticism from the UK chief Brexit negotiator, David Frost, saying that the EU is no longer committed to working intensively to reach a future partnership as Sterling slipped back below the 1.2900 against the Dollar and to 1.1010 against the Euro
Market participants will now look to the UK Prime Minister Boris Johnson’s decision on whether the UK will walk away or continue Brexit negotiations with an announcement expected later today.
The fragile risk sentiment in the global markets has supported the Dollar this week. Notably, the US stocks dropped for the third straight day yesterday as an unexpected rise in the weekly jobless claims revived fears of a slowdown in the world’s largest economy.
Additionally, deadlock in Washington over the fiscal stimulus talks and the coronavirus resurgence across Europe weighed over the investor sentiment and put a bid under the greenback.
However, while heading into the weekend, the dollar could face some selling pressure if global stocks witness risk reset, as suggested by the 0.2% gain in the S&P 500 futures. That said, significant gains look unlikely due to renewed virus fears and growth concerns. As such, the dollar is likely to close the week with gains, snapping a two-week losing trend.
The Euro has declined around 1% so far this week and looks set to extend its losses unless the US data disappoints later today. Fears that the Eurozone economy could potentially be significantly hit by the coronavirus resurgence is pushing the US-German yield differentials higher and weighing over the common currency.
On the docket today, Eurozone Trade Balance and Consumer Price Index are due for release later this morning but may not be impactful enough to move any of the Euro pairs. may not have a big impact on the EUR pairs.
As of writing, the Euro currently trades just above the 1.17 mark against the Dollar.
Data to watch
13:30 – USD – Core Retail Sales
13:30 – USD – Retail Sales
15:30 – USD – Prelim UoM Consumer Sentiment