GBP - British Pound
Friday was a strong day for the pound, as Brexit sentiment took the main stage. UK chief negotiator, Lord Frost, is now confident a deal will fall into place; however, it will likely be after the UK’s self-imposed deadline of October 15th. The UK managed to find common ground with the EU on the issue of state aid, which allowed for talks to revert back to the much-heated fishery debate, which lead to a breakdown in talks.
As is once again the case, individual data releases from the UK are doing little to dictate the pounds direction, however it is likely that BoE Gov Bailey’s speech on Thursday will provide some talking points. At present, we are seeing conflicting views released from the monetary policy committee, with some ruling out the idea of negative interest rates (IR), and others suggesting they are an available policy option on demand. Talk of cutting IR into negative territory has weighed on the pound in the last few months and will continue to do so as long as Bailey refuses to rule them out. Other than Bailey’s address, there is no real data releases scheduled for this week.
The main headline grabber at the end of the last week was that both Donald and Melania Trump tested positive for COVID-19. Trump was admitted into hospital for safety reasons however is suggested to be on the brink of full fitness once again. Reports have surfaced suggesting he will likely be released on Monday. With just over a month until election time, Trump will likely use his swift recovery as a tool to show how fighting fit he is, and how he is ready to serve another term as president. Stocks will likely rally as news breaks of his full recovery and there is every possibility the US Dollar could also strengthen slightly. Friday was still a good day for the US Dollar, despite the news as it performed better than all majors other than the Japanese yen and Sterling. This is mainly down to the better-than-expected employment data, which has been a huge talking point since the record high numbers at the start of the year.
Europe is still enforcing stricter rules in Madrid and Paris as curfews of 11pm are implemented to slow the virus spread. With such cultural and economic significance, it is likely this’ll hurt GDP figures later this month and could knock the euro in the short term. We have 3 scheduled speeches for Lagarde across Tuesday and Wednesday this week, in which she will likely give further clues into their Euro and inflation monitoring. On Wednesday we have the US FOMC minutes release, meaning a big week for central banks.