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Sterling Opens Higher as Brexit Talks Extended

Sterling Opens Higher as Brexit Talks Extended

GBP

Bank of England Governor Bailey has stated that the UK financial sector is prepared for all Brexit eventualities, he also warned however, that there would be severe short term disruption to the economy in the event of a No-Deal. Markets remained uneasy as expectations of disruption even in the event of a best-case scenario.

Political rhetoric was notably downbeat on Friday with both UK PM Johnson and EU Commission President von der Leyen both warning that a no-deal outcome was more likely than a deal. On the back of the statements from both leaders, Sterling slumped to lows below 1.3150 against the Dollar and to 1.0835 against the Euro, a 3-month low.  

Following another conference call on Sunday, Johnson and von der Leyen agreed that talks should continue into next week and up to 31st Dec if necessary. 

Sterling posted sharp gains at the Asian open on relief that talks would continue with the UK currency vulnerable to further volatility with Brexit updates expected throughout the day. 

 

USD

US producer prices increased 0.1% for November with underlying prices also increasing by 0.1% on the month to give a year-on-year increase of 1.4%.

The University of Michigan consumer confidence index strengthened to 81.4 for December from 76.9 previously and above consensus forecasts of 76.5. There were significant increases for the current conditions and expectations components on the month.

There was further speculation that the Federal Reserve could consider fresh stimulus measures if there is no agreement on a new fiscal stimulus early this week.

The US currency was still able to secure some respite amid a more cautious tone and the Euro retreated towards 1.2100 into the European close.

 

EUR

The Euro has retreated slightly this morning as we begin Monday’s trading session. The single currency continues to be unsettled by unease over Brexit developments with short-term coronavirus developments still a major factor. 

CFTC data registered a renewed increase in long Euro positions while Dollar shorts increased to a 3-month high, maintaining the risk of a correction if there is any shift in sentiment. The Euro will look to gain ground on Brexit negotiations now heading into another week, or at most, until the end of the year. The Dollar, to some extent, is also under pressure on speculation over a dovish Federal Reserve at their next policy meeting on Wednesday.

As of writing, the Euro currently trades just over the 1.2150 mark against its US counterpart.

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