Sterling lower as Brexit anxiety weighs
Sterling took a step back on Tuesday, dipping against a broadly stronger dollar and also falling back against the Euro as currency markets kept an eye on ongoing Brexit negotiations for fresh drivers over the next few weeks.
Recent reports have claimed that the European Union want further concessions from Britain before entering the last, intense phase of negotiations on future relations following the United Kingdom’s departure from the EU. Both the EU’s Michel Barnier and Britain’s David Frost, say they are edging towards a deal, though they have still stated that important differences remain on fishing, level playing field issues and governance. British Prime Minister Boris Johnson had previously set a deadline of the October 15th EU summit for agreeing a trade deal and chief negotiator Frost is in Brussels for intensified talks.
Sterling has only been marginally affected this week by labour market data, the Bank of England further discussing the possibility of negative interest rates, and renewed social restrictions in the UK to combat a fresh wave of COVID-19 infections, despite the implications of these factors for Britain’s economy.
The US dollar gained on Tuesday as investors took a cautious approach after a high profile Johnson & Johnson COVID-19 study was paused, coming as hopes also dimmed that a fiscal stimulus package could be reached before the upcoming presidential election.
Risk appetite has dimmed at the start if this week, partly due to a decline in J&J shares after the company paused its study due to an unexplained illness in a participant, dampening optimism about a successful vaccine. The dollar index rose just over half a percent against a basket of currencies, putting it on track for its biggest daily percentage gain in three weeks.
The US currency’s safe-haven appeal had previously been curbed by growing expectations that a win by former Vice President Joe Biden on November 3rd would bring large stimulus for the pandemic-hit economy, bolstering the stock market and investor risk appetite.
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