30/10/2020

Mixed day for Sterling on positive Brexit headlines but rising covid cases


GBP

Sterling had a turbulent day yesterday after positive Brexit headlines and rising covid cases were announced. The president of the EU Commission , Ursula von der Leyen,- said yesterday, talks are making “good progress’ and the two sides are approaching a deal. ‘A level playing field and fisheries are the only two points left to discuss’ she added. The talks will now move to Brussels with the hope that these differences can be bridged by Nov 3rd. The mid November EU council meeting is now being set as the new deadline. While this news remains positive, there is still the chance that both sides walk away from the table so markets will remain cautious. While the news around Brexit remains positive, a second Covid-19 wave in the UK is likely probable. Yesterday saw another 23,065 cases being reported across the country as Matt Hancock was quoted saying ‘ decisive action is needed as we head into the winter break’. We expect further Tier 3 restrictions to be announced over the weekend. This begs the question, should the UK be following our European counterparts that are going into a national lockdown?

EUR

The euro approached 4 weeks lows against the USD after the ECB signaled that further monetary policy was coming by the end of the year. The ECB kept interest rates the same. However, they indicated that further stimulus would be needed to contain the effects of the virus. Support for the Euro already proved limited after news of France being put back into a state of national lockdown for the next four weeks. With Germany also implementing tighter social restrictions, in the face of rising cases, confidence in the outlook of the Eurozone economy has weakened leaving EUR exchange rates leaning towards the downside.

USD

Data yesterday showed that the US economy grew at a notable pace for the 3rd quarter. Furthermore, In the week ended Oct 24, 751.000 people filed for state unemployment, compared to 791,000 people in the previous period. While this is an improvement, it was below expectation, highlighting signs of a sluggish USD recovery. The US also reported the highest single day for new cases with 88,000 people testing positive yesterday. Hospitalizations are also now at a record high in some states. This no doubt will put pressure on the dollar as we move into the weekend. In terms of the election, Joe Bidden still leads in the polls. Reports suggest that Trump will hold a last ditch rally to try and overcome this polling deficit.

Data

10:00 GMT: EUR CPI YoY
10:00 GMT: EUR GDP YoY
10:00 GMT: EUR GBP QoQ
10:00 GMT: EUR Unemployment Rate


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