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Hope Of Deal Keeps Sterling Afloat

Hope Of Deal Keeps Sterling Afloat


Sterling is advancing above the 1.29 against the Dollar and 1.1050 against the Euro amid hopes that Brexit talks could resume and that the UK would water down the controversial Internal Markets Bill.

Sterling pairs saw a fair amount of movement on Friday as UK PM Boris Johnson reiterated his stance on seeking a no-deal unless there was a fundamental change of approach from the European Union. Johnson further clarified that he is not completely walking away from negotiations which, in turn, extended support for the UK currency. 

According to reports, Johnson’s spokesman had said that talks with the EU were over and that EU Chief Negotiator Michel Barnier should only come to London if he is prepared to address all the issues on the basis of a legal text in an accelerated way. Incoming Brexit related headlines will continue to play a key role in driving Pound sentiment but the lack of deal progress alongside resurgent COVID-19 cases could see Sterling sell off and keep a lid on any meaningful positivity for the UK currency.



A slight improvement in the global risk sentiment – as depicted by a positive tone around the equity markets – weighed on the US dollar’s safe-haven status, which, in turn, was seen as a key factor lending some support to the major. Investors’ confidence got a minor lift after the US President Donald Trump on Thursday offered to raise the size of the fiscal stimulus package to win the support of Republicans and Democrats. However, concerns that a steep rise in new coronavirus cases could trigger renewed lockdown measures and hurt the ongoing recovery in the global economy helped limit any deeper USD slide.

The greenback, however, gained some traction in reaction to stronger-than-expected US monthly Retail Sales data, which further collaborated towards capping the upside for the major. In fact, the headline sales recorded a strong growth of 1.9% in September. Adding to this, Core Retail Sales and the closely watched Retail Sales Control Group also came in better-than-expected.



Eurozone CPI came in on Friday at -0.3% YoY for September compared to -0.2% previously. Core CPI also slowed to 0.2% YoY down from 0.4% in August. The data further fuelled worries about increasing deflationary pressure in the region and held Euro buyers from placing aggressive bets.

Following the data, the Euro edged higher on Friday against the Dollar, albeit lacking any serious momentum and remained well within the previous day’s broader trading range and within a multi-month channel of 1.17 to 1.19. The single currency is currently trading around the 1.1710 mark but with continuing rising COVID-19 cases in Europe, concerns from ECB President Lagarde may see a push lower in the currency as the week progresses.


Data to watch

All Day – All Currencies – OPEC-JMMC Meetings 

13:00 – USD – Fed Chair Powell Speaks

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