Pound Steady As Waiting Game Continues
Michel Barnier commented that “level playing field” talks had been hard but were moving in the right direction. EU Commission President Ursula von der Leyen added that the deal structure looked fair, but there were still a number of details to work out to ensure fairness. The Pound maintained it’s strong tone following the more upbeat sounding rhetoric from EU officials, but the uncertainty remained high and UK officials were largely downbeat. The markets were also concerned over potential trade disruption at year-end amid fears that there isn’t sufficient implementation time left even if a deal is secured within the next few days.
Markets remained cautious of sharp Sterling moves, especially with trading volumes fading towards year-end. The Pound dipped sharply into the European close, falling from 1.3440 to near 1.3330 against the Dollar while the Euro strengthened to near 1.0990 from lows just below 1.1050.
News that London would soon enter tier 3 coronavirus alert level has slightly depressed the Pound but global risk appetite remains firm this morning. Unemployment increased to 4.9% in the 3 months to October, below expectations of 5.1%, but the unemployment claimant count increased 64,000 for November and payrolls declined again for the month.
The Dollar traded near 2 1/2-year lows against major peers on Tuesday as demand for the safest assets flagged amid progress toward agreeing U.S. fiscal stimulus and optimism for a Brexit deal.
The greenback was near its weakest since mid-2018 against the Euro and Sterling with US lawmakers scurrying to ready $1.4 trillion in spending. A $908 billion bipartisan COVID-19 relief plan will be split into two packages, with a statement confirming a large part of the plan that already has bipartisan support will be approved. “The big picture is that 2021 looks increasingly promising for global growth, and the U.S. will certainly be a part of that.
Eurozone industrial production increased 2.1% for October after a 0.1% gain previously with a year-on-year decline of 3.8% from 6.3% previously and above consensus forecasts of a 4.4% decline. There was wider caution over the near term outlook as coronavirus restrictions were set to tighten in a number of countries as Germany announced further restrictions during the Christmas and New Year period.
The Euro maintained a firm tone heading into the US session with support from a fall in expectations that the Brexit trade talks would end in a ‘No-Deal’. There was caution however, with Euro-zone business confidence data due on Wednesday as expectations of further stresses within the services sector as coronavirus restrictions continue to undermine activity.
Neither the Euro or the US Dollar was able to secure a decisive advantage with the pair still training within a very tight range and as of writing, the Single currency currently trades just over the 1.2135 mark against its US counterpart.