Daily Currency Update

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Pound awaits Brexit breakthrough

GBP - British Pound

After opening sharply higher yesterday the pound has now pared some of its gains as it awaits developments from Brexit trade talks in Brussels. Sterling jumped yesterday as it was confirmed that the UK and EU would "go the extra mile" in a statement from both sides that trade talks would continue despite yet another self-imposed deadline for an agreement not being met. GBP/USD opened around 1.3350 and peaked close to 1.3450 as holders of the pound grew hopeful that an agreement would be found. It has since retraced as the impasse continues and is currently hovering around the 1.3320 area.

The other main development from the UK yesterday was confirmation that Greater London and surrounding areas including parts of Hertfordshire and Essex would enter tier 3 Coronavirus restrictions from just after midnight tonight. With case numbers rising in the capital the news was not unexpected and it will do further economic damage to the UK in particular the hospitality sector with all restaurants and pubs to close their doors, unless they offer a takeaway service. By acting now it is hoped the government will not have to change its mind over its plan to relax rules over households mixing over the Christmas period.

The level of unemployment in the UK has ticked higher this morning to 4.9% which equates to around 1.7m people being out of work. Over 800k people have been laid off since the start of the pandemic and this figure would undoubtedly be much higher had it not been for the UK's furlough scheme supporting the incomes of millions of workers.

There is little data due for the rest of the day with sterling's direction to be entirely dictated by trade talk news. GBP/EUR trades just under the 1.10 handle.

Key Movers

A lot of focus will be drawn to the US this week as tomorrow brings the latest interest rate decision from the Federal Open Mark Committee. No change in rates is expected from the Fed however it may look to extend its loose monetary policy measures even further in the face of soaring Covid-19 cases. With Republicans and Democrats still in deadlock over fiscal support its looking like it will be the Fed that is next to act to help try and protect business' impacted by a huge new surge of Coronavirus cases which has seen the official death toll top 300k, the highest for an individual country in the world. Ahead of the Fed decision there is US retail sales data due tomorrow which is expected to show a contraction in spending in November.

From Europe we get monthly PMI figures tomorrow morning with the second wave of Covid-19 likely to impact particularly badly the service sector with many countries throughout the continent enacting new restrictions to try and contain the virus ahead of Christmas.

EUR/USD remains elevated trading around 1.2150 with USD/JPY at 104.1

Expected Ranges

GBP/USD: 1.32 - 1.34 ▼

GBP/EUR: 1.0880 - 1.1040 ▼

GBP/AUD: 1.76 - 1.7770 ▼

GBP/NZD: 1.87 - 1.89 ▼

GBP/CAD: 1.6920 - 1.7070 ▼