Daily Currency Update

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Sterling Benefits from Dollar Weakness

GBP - British pound

Yesterday Sterling was the best performing currency, with GBP/USD testing the 1.33 handle and GBPEUR breaking 1.12. The UK jobs market data releases were a mixed bag, employment change fell more than expected, however average hourly earnings increased. The unemployment figure rose from 4.5% to 4.8% for the 3 months prior. The main reason Sterling performed so well was because of the sell-off in the US dollar. Looking ahead at GBP/EUR, the weakness of the Eurozone and any Brexit headlines are going to dictate its direction.

It is rumoured that the UK and the Europe are going to have to extend yet another deadline. The current deadline for a deal, mid-November, is looking less likely and this will no doubt be extended into December. This headline did cause a very short term wobble in any Sterling denominated currency pairs.

The UK is light on economic data for the remainder of the week and the only releases to watch out for will be the Bank of England governor Baileys speeches today at 4.45pm (GMT) and tomorrow at 4.00pm (GMT) where he may shed some further clarity on the Bank of England’s stance on negative interest rates and a post-Covid UK economy.

Key Movers

After a flutter of market activity over the last few days, with a huge rally in the stock markets after the news that Pfeizer had a successful vaccine for the Covid virus, that could be rolled out as early as January, the last 12 hours have actually been relatively flat.

A continuing insistence by Trump that the election was one massive fraud and his refusal to leave the White House peacefully may pose a risk to the market that maybe underestimated by the markets. The market is leaning towards risk on sentiment, with the US dollar remaining weak overnight, after Biden ignored Trumps fussing and proceeded to continue with the transition plans, but we are yet to see if there are plans to take this to the Supreme Court and how this could play out. This could bring with it uncertainty and investors piling back into the US dollar as a safe haven option. For now, the markets are ignoring this threat, but the longer Trump drags this out, concerns from certain corners of the market may increase around legal action and a protracted transition between Trump and Biden.

The Euro remains on the back foot after Covid concerns across Europe, with rising case numbers and the economic impact of tighter lockdown measures. EURUSD broke below the 1.18 mark again, while GBPEUR is trading well into the 1.12's now.

The biggest event overnight came from New Zealand, where the RBNZ decided against reducing interest rates further and sending them into negative territory. This was unexpected and there were suggestions that there could be further loosening of monetary policy from New Zealand's central bank, but this is deemed as good news, and the Kiwi Dollar strengthened.

Expected Ranges

GBP/USD: 1.3205 - 1.3310 ▲

GBP/EUR: 1.1205 - 1.1315 ▲

GBP/AUD: 1.8110 - 1.8250 ▲

EUR/USD: 1.1710 - 1.1845 ▼