GBP - British Pound
GBP opened marginally lower yesterday after a period of intense talks between UK and EU chief negotiators, Frost and Barnier, ended without even a partial agreement. While most anticipate that an 11th hour compromise could be found, the year-end deadline is fast approaching, limiting the time needed for any deal to be ratified.
While the news and gossip from the talks seemed to point towards progress being mixed, the net result throughout the day was overall optimism on a deal being reached. This combined with the news that the UK is poised to become the first western country to approve a COVID-19 vaccine, saw sterling gain briefly above the 1.34 handle against the dollar.
In terms of data, Brexit talks and COVID-19 continue to dominate market moves but today does see the release of UK, European and US Manufacturing PMI numbers plus preliminary EU Consumer price index figures for November.
There are also two speeches from US and European central bank chairs/presidents to watch out for, which may give some insights into the current and future states of their and the world economy. As such, any change to their recent rhetoric may provide some volatility.
This morning trading has seen the US dollar bounced back from Monday’s lows amid souring risk appetite and a correction across equities driven by softer than anticipated US economic data. Home sales fell over 1% in October while factory output throughout the Midwest slowed through November as the region grapples with the effects of COVID-19’s resurgence.
The impacts of COVID19 and the Q4 retracement in economic activity, coupled with the ongoing absence of fiscal support, means the road to recovery will be much longer than first expected, suppressing monetary policy expectations well into the future.
The Euro opens today marginally lower, slipping off 3-month highs of 1.20 versus the USD amid month end rebalancing and expectations the ECB may intervene to suppress further gains.
Having signalled it would carefully monitor the exchange rate to ensure a rapid appreciation did not impact Europe’s ability to recover from the impacts of the COVID-19 pandemic, the ECB has opened the door to speculation it may use monetary policy to control any ongoing uptick. Having advanced 2.6% in November, and with signs national lockdown measures are controlling the spread of the virus, there is an expectation with the introduction of a vaccine Europe will be well placed to enjoy a swift rebound in activity come 2021.
Across the other side of the world, the Reserve Bank of Australia (RBA) released the minutes from their latest monetary policy meeting and interest rate announcement. Having cut rates and expanded its Quantitative Easing platform last month, the RBA (as expected) kept the status quo.
Looking ahead to today, the main news comes in the form of European CPI numbers and US manufacturing figures, however, it will be worth while keeping a close eye on European central bank president Lagarde’s speech, this evening, in case she signals that further ECB intervention may happen.
1.3320 - 1.3420 ▲GBP/EUR:
1.1115 - 1.1215 ▲GBP/AUD:
1.81 - 1.8250 ▲GBP/NZD:
1.89 - 1.91 ▲GBP/CAD:
1.7275 - 1.74 ▲