Brexit and Bank of England aid the pound
Tuesday 29 September, 2020
Daily Currency UpdateGBP - British PoundWith renewed optimism about Brexit talks yesterday Sterling was the markets best performing currency. This was despite reports that the UK and EU will continue to talk and negotiate despite both sides not ceding any ground on the UK's controversial Internal Market Bill. The EU has stated the UK has until the end of the month to remove the controversial elements on state aid and export licences in Northern Ireland before they face legal action. Sterling was also buoyed on comments from Deputy Bank of England Governor Dave Ramsden who spoke yesterday in a recorded interview that negative interest rates, despite being in the toolbox, were not appropriate. Ramsden stated that "I see the effective lower band still at 0.1% which is where Bank rates are at present. It is useful to stress that". You can't get a clearer view from an MPC member than that but the issue for investors is that they contrast those of Silvana Tenreyro, whilst the Governor Andrew Bailey sits somewhere in the middle. 5th November is the next key date for the Bank of England to watch out for.
Key MoversWhilst the first US Presidential debate is tonight investors appear more worried about the uncertainty over a disputed election could bring. Future contracts tied to volatility show a 'kink' in November as speculators look to profit from the uncertainty of the election. Whilst volatility is always expected over elections it is the contrast against previous years that shows the heightened uncertainty and the price of these contracts, which are often used to hedge against volatility, have increased since Trump suggested last week he could dispute the election result. Uncertainty and volatility often means though that safe haven currencies such as the Japanese Yen, Swiss Franc and US Dollar benefit.
- GBP/USD: 1.2835 - 1.2900 ▲
- GBP/EUR: 1.0990 - 1.1030 ▲
- GBP/AUD: 1.8120 - 1.8280 ▲
- EUR/USD: 1.1620 - 1.1680 ▲