Daily Currency Update

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One week until US election

GBP - British pound

It was confirmed yesterday that Nottingham is being pushed into tier 3 Coronavirus restrictions later this week as case numbers there continue to rise. The city will join Liverpool and Manchester under the tightest controls when the move comes into effect on Thursday night, meaning pubs that don’t serve a substantial meal will have to close as well as gyms and some other business. The seven day rolling average for new cases is around the 22k mark and 102 people were confirmed as dying from Covid-19 yesterday, although the figure on Monday is usually lower than other days due to a reporting lag over the weekend.

Away from Coronavirus, Brexit talks continue with just over two months to go until the UK will default to WTO rules if a trade deal can’t be done with the EU. There is optimism that we will get a deal sometime next month which is likely one of the reasons why sterling remains relatively elevated. It continues to trade above 1.30 against the dollar and above 1.10 against the euro. There is plenty of scope for some big sterling losses towards the end of the year, should no deal be struck. Also, the Bank of England continue to hint they may look to introduce negative interest rates early next year although this isn’t a done deal and will likely depend on Covid-19 developments and the outcome of the Brexit trade talks.

Key Movers

Its now just one week until the US goes to the polls on November 2nd for the US general election. Most polls continue to put Joe Biden ahead of President Donald Trump; however, the battle will be won in the key swing states such as Florida and Pennsylvania where Biden still has a slender lead. Biden is still odds on with the bookies to win, though it should be noted that most book makers got the Brexit result and the last US general election wrong, so it is far from a done deal. The effect a Biden win on the dollar remains unclear as him winning would likely open the door to larger support measures for those affected by Covid-19, widening the deficit and potentially pushing the dollar lower. The most interesting scenario would be a recount if it is too close to call. The uncertainty may see risk off moves to the greenbacks benefit.

EUR/USD remains above the 1.18 handle as the euro remains well bid ahead of the election. Before that on Thursday we have an interest rate decision from the European Central Bank where comments on the pandemic from ECB head, Christine Lagarde will likely be scrutinised. There are no expectations of a change of policy just yet, nevertheless we may see some jawboning of the shared currency lower as it gets ever closer to the key 1.20 handle. It’s a another relatively quiet day data wise with just the latest US Durable Goods orders due at lunchtime.

Expected Ranges

GBP/USD: 1.2970 - 1.31 ▼

GBP/EUR: 1.0980 - 1.1080 ▲

GBP/AUD: 1.8230 - 1.8340 ▼

GBP/NZD: 1.9420 - 1.9520 ▼

GBP/CAD: 1.71 - 1.7210 ▼