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Brexit optimism boosts the Pound

Wednesday 18 November, 2020

Daily Currency Update

GBP - British PoundPositive Brexit news continues to strengthen the pound, as GBPUSD broke through both the 1.32 and 1.3250 handles as further rumours suggest a trade deal will be agreed with the EU in the next week or two. The market seems optimistic, and the prospect of a working vaccine and a trade deal could push GBPUSD to 1.35 this side of 2021. In a cryptic message, EU Commission spokesman, Eric Manner said: "What is clear is that we continue to negotiate intensively with our UK partners and we aim, obviously, to find a deal when the conditions will be there. We are not going to give a blow-by-blow account of what negotiators are working towards." BoE deputy Gov Dave Ramsden added to the optimism by stating markets are now only pricing in a 20% chance of a no deal Brexit, which are certainly the best odds seen in a while.In other news, BoE Gov Bailey gave an insight into the policy options at hand currently. He stated that quantitative easing was a great option at times like this, as it keeps markets liquid whilst also not tightening financial conditions. He also did not mention negative interest rates, which the pound will continue to take solace in.

Key Movers

The US continued to feel the full force of the coronavirus on Monday as retail sales came in worse than expected. The US economy is driven by consumer spending, making retail sales a very important print at present. Equity markets were in the red globally, and there certainly was a risk off tone in the market. The US faces a greater issue in the coming weeks as housing and income subsidies are soon due to expire, meaning many US citizens will be left without financial aid. Biden warned that the US is heading for “very dark winter”.Analysts suggest that the Eurozone is headed full throttle towards a double dip recession. With lockdowns still prominent across the continent, the economy has been badly hit and will likely force the hand of ECB President Christine Lagarde in an attempt to combat. She seems open to using the tools available and certainly would not rule out an interest rate cut at the next ECB meet on 10th December. It is likely a cut would boost the Euro, contrary to logic.

Expected Ranges

  • GBP/USD: 1.3195 - 1.3380 ▲
  • GBP/EUR: 1.1110 - 1.1285 ▲
  • GBP/AUD: 1.8055 - 1.8275 ▲
  • GBP/CAD: 1.7240 - 1.7485 ▲