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A tale of two halves for the pound

GBP - British Pound

The story yesterday morning, apart from the Oxford University/Astrazeneca vaccine update, was all about the UK’s PMIs which provided the latest update on the state of the economy for November. Whilst the manufacturing sector beat expectations and showed a quite impressive level of expansion compared to the previous month, the important service sector slowed. The data points towards a double dip recession for the UK and as we move towards the end of the year it is still highly uncertain what the UK economy will look like in 2021.

Despite this, Sterling performed admirably in the morning. The currency was buoyed, as mentioned yesterday about good vaccine news as well as the rumour that Boris Johnson could step into Brexit negotiations to provide some focus. As the title suggests however the afternoon session was a marked difference and saw the US dollar surge to the top of the leader board. Once again GBPUSD 1.3400 remains an elusive marker for the currency pair.

Key Movers

It was the release of the US’s own Markit PMI data that set the tide turning for the US dollar yesterday as both manufacturing and services expanded and beat expectations. Equities in the US were then dealt some welcome news as reports that former Federal Reserve Chair Janet Yellen would be Joe Biden’s pick for US Treasury Secretary. Why is this important? Well Yellen used to be the former boss of current chair Jerome Powell and this would mark a new relationship between the Fed and Treasury compared to the strained one that currently exists.

The final surge for the US dollar and the nail in the coffin for the pound came towards the London Fix as investors shored up their positions for the day. This saw a huge demand again for dollars with GBPUSD shredding almost 140 pips whilst similar moves were also seen against the euro. These sort of moves around the London Fix aren’t unsurprising but it would seem that thinner liquidity in the run up to Thanksgiving could be a theme this week and exaggerate volatility.

Finally, Donald Trump looks like he has finally conceded the US race for the White House, or at least we have been given as close to a concession as we can expect.

As touched upon the euro suffered a similar fate as the pound yesterday as the dollar showed its strength. PMIs were similar as well with services businesses shut across Europe as similar countries to the UK went into their own relative lockdowns for the second time, whilst the manufacturing sector continued to operate. EURUSD made a run for 1.1900 once again before losing 100 pips at the London Fix.

Expected Ranges

GBP/USD: 1.3280 - 1.3400 ▲

GBP/EUR: 1.1180 - 1.1280 ▲

GBP/AUD: 1.8160 - 1.8300 ▼

EUR/USD: 1.1810 - 1.1880 ▼