Sterling Continues Its Rise But For How Long?
Sterling continued to make headway ahead of the US open with underlying expectations that there would be a trade agreement as the Pound remained above the 1.3000 level against the Dollar.
Bank of England Governor Andrew Bailey stated that the economic risks are all on the downside as far as negative rates are concerned whilst also pointing out that the bank does not know how quickly negative rates could be implemented. Bailey was also clear to state that negative rates are not being considered as a potential policy move at this stage.
There were reports that the government was looking to launch an office for investment which would aim to attract foreign capital into the UK. There was some relief that the new UK tiered system was less restrictive than feared and Sterling initially advanced to fresh 1-month highs against the Dollar near 1.3080 and 1.1075 against the Euro. The currency then edged lower as risk appetite was less buoyant and it emerged that the government had rejected scientific advice on coronavirus measures.
US equity markets secured further strong gains yesterday amid expectations of a longer-term fiscal boost, especially if the Democrats can secure control of Congress and win the Presidency in November elections. Political rhetoric was limited given the US holiday, but markets monitored President Trump closely as he looked to re-start campaigning in Florida.
US developments were limited given the Columbus Day holiday yesterday.
ECB vice-president de Guindos stated that high-frequency indicators point to losing momentum. He additionally commented that the central bank is closely monitoring the second-wave risks while it has time to decide on the future of PEPP. There were further expectations that the ECB would engage in further monetary easing before the end of 2020.
The Euro was unable to make any further headway into the US open with the Dollar recovering some territory. The Euro was also hampered by concerns over the Euro-zone recovery profile as coronavirus cases continued to increase and stalled near 1.1830 before retreating.
As of writing, the Euro currently trades around the 1.1785 against its US counterpart.
Data to watch
07:00 – GBP – Claimant Count Change
13:30 – USD – CPI
13:30 – USD – Core CPI