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France and Germany to lockdown after Covid-19 surge

GBP - British pound

Yesterday saw some big swings in GBP/USD as a big risk-off move in the market driven by concerns over a surge in cases saw investors seek the safety of the US dollar. After trading around 1.3060 in the early hours GBP/USD took a dive to hit a low of 1.2925 before bouncing back to 1.30 as positive Brexit trade deal headlines came to the pounds rescue. There were rumours that there had been a narrowing of the gap between the two sides on the remaining issues with hopes a deal can be struck in the first half of next month. There have been no official statements from either side so the wait continues, with the pound starting to drift lower again as result. It does appear we are getting closer to an agreement, with each side likely being spurred on by a drastically deteriorating situation re: coronavirus and a hope to limit the additional economic damage that would be caused by the UK defaulting to World Trade Organisation rules on January 1st. There is no top tier data for the rest of the week from the UK so the pounds direction will be driven by Covid-19/Brexit/US Election developments. GBP/EUR trades around 1.1080.

Key Movers

It was another shocking day for European equities yesterday as panic spread amongst investors about the rapid escalation in coronavirus cases. To highlight the drop, Germanys index of its top 30 listed companies, the DAX, has fallen over 1000 points since the start of the week dropping from 12,600 to a low yesterday of around 11,460. Record numbers of coronavirus infections have forced the hands of France's President, Emmanuel Macron and Germany's Chancellor, Angela Merkel into announcing countrywide lockdowns for November. Frances’ measures are particularly strict with anyone leaving home needing to have completed form to evidence the reason why and all non-essential business' being forced to shut. Germanys measures are slightly more relaxed however one of the main differences between March and now is that schools are to remain open in both countries as the nations leaders try to shield the educational impact on its children.

The acceleration in cases will no doubt be highlighted by European Central Bank chief Christine Lagarde in a press conference today which follows the banks latest interest rate decision. No change in policy is expected however we can expect a stark picture to be painted by Lagarde with further easing measures possibly being telegraphed for the December 10th meeting.

EUR/USD just over a week ago was close to breaking above 1.19, however it has fallen away towards 1.17 as markets digest the economic impact the latest surge in cases could have on the eurozone economy and the easing measures that may be needed to support the economy through the winter.

Finally, both candidates for the US Presidency made appearances yesterday with Democrat nominee Joe Biden getting a public endorsement from Oprah Winfrey and President Donald Trump getting backing from Brexit patriarch, Nigel Farage. The election is now just five days away.

Expected Ranges

GBP/USD: 1.2925 - 1.3060 ▼

GBP/EUR: 1.1020 - 1.1175 ▲

GBP/AUD: 1.8350 - 1.8525 ▲

GBP/NZD: 1.9480 - 1.9670 ▲

GBP/CAD: 1.7235 - 1.74 ▲