Brexit obstacles weigh on the pound
Wednesday 7 October, 2020
Daily Currency UpdateGBP - British PoundOnce again, GBP looked to Brexit headlines for movement on Tuesday, as conflicting reports leave sterling bouncing between $1.29-$1.30 against the US Dollar. The day began well with the UK-EU negotiators finding common ground on smaller issues, such as benefits and social security. The two parties are still yet to agree on issues including fisheries and to what extent the UK legislation must align with the EU, which are both large roadblocks. Officials from the EU have been quoted saying that “a deal is possible, but not guaranteed”, however this is still a positive sign, considering the contradictory statements given over the past months from EU officials. It is now just over a week until Johnson’s self-imposed deadline, and there is still a lot to do. The general market consensus is that an extension will be granted, which Johnson will reluctantly accept. This will likely lead to sterling strength, provided there is light at the end of the tunnel, and investors see progress.
Key MoversWith little to no macroeconomic data released yesterday, sentiment once again guided the US dollar. There seemed to be a slight risk-off attitude with investors, which left the safe haven currencies, including the Japanese yen and US dollar, trading higher. After Trump’s successful recovery from COVID-19, he spoke on the coronavirus-relief spending options and stated that he will not focus on this until after the election. He suggested that once the election is done, their new stimulus package will be granted, however, there are a few obstacles in his way first. Polls suggest the two are basically neck and neck, however Trump has certainly regained some popularity over the past 3 weeks.In other US news, today at 7pm BST we expect the Federal Open Market Committee (FOMC) minutes from the September Fed meeting to be released. It will give us some insight into the inflation and economic output targets. Christine Lagarde, head of the ECB, is also scheduled to give an address.
- GBP/USD: 1.2845 - 1.3010 ▼
- GBP/EUR: 1.0900 - 1.1060 ▼
- GBP/CAD: 1.7080 - 1.7275 ▼
- GBP/AUD: 1.8010 - 1.8195 ▼