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Sterling To Remain Clouded Even If Deal Agreed

Sterling To Remain Clouded Even If Deal Agreed

GBP

Various reports are concluding that the outlook for the British Pound will remain clouded into 2021 even in the event of a post-Brexit trade deal is reached this year. A finding that will disappoint market participants looking for a potential sizable rally on the sealing of the deal between the EU and the UK. The Pound has been one of the better performing major currencies since September as investors began to increase expectations that a post-Brexit trade deal would be reached with the EU before the year end cut off for the transition period.

Sterling also got a strong lift after the Bank of England refrained from cutting interest rates and expanded its Asset Purchase Program by £150 billion to a total of £895 billion. The central bank also showed further readiness to ramp up the stimulus whilst Chancellor Rishi Sunak announced an extension of the furlough scheme to the end of March. On the back of this news, the Pound surged past the 1.3100 mark against the Dollar and seemed rather unaffected by the FOMC decision and over the 1.1115 against the Euro. 

 

USD

Buyers and sellers are both refusing to lead on price action as continued uncertainty in the US election remains. While Democrat Joe Biden inches closer to the White House, the jury is still out on the final verdict, with votes still being closely counted in five key states. 

According to reports, investors expect a Democrat win with the Republicans retaining control of the Senate. This would allow Republicans to block Biden’s plans to raise corporate taxes and deliver a massive fiscal spending package. That said, the probability of the current indecisive price action ending with a fresh bullish move is high as the Federal Reserve has the ability and is willing to do the heavy lifting if the split Congress fails to deliver a sizable stimulus package. The central bank reiterated its dovish stance yesterday and expressed it will step in if required.

The greenback had picked up bids during Wednesday’s Asian trading hours after President Trump’s victory in Florida dashed hopes of a Democratic blue wave. However, the gains were short lived as focus quickly shifted to the dovish Fed expectations.

 

EUR

The Euro is on the bid with the market’s focus on easing from the Federal Reserve and the tightening in the US presidential election race.

The single currency has been undermined by the spread of the coronavirus considering much of Europe is now experiencing higher levels than recordings from the spring. More encouragingly however, according to reports, data collected showed 88 daily COVID-19 related deaths in France compared to its peak in early April of over 1000 fatalities within a 24 hour period.

Nevertheless, markets will be concerned of the continued spread and the serious challenges it continues to have on economic recovery. The implication of the lockdowns will hamstring the Euro and could expose it to a sell on rallies across the board. As of writing, the Euro currently trades around the 1.1835 against the Dollar. 

 

Data to watch

14:30 – USD – Average Hourly Earnings

14:30 – USD – Non-Farm Employment Change 

14:30 – USD – Unemployment rate 

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