EU source reports indicated yesterday that the trade negotiations between the EU and the UK would not be agreed this week with the mid-November deadline being missed. The source also added that the aim however, was to complete a draft legal text by the middle of next week. There were still underlying expectations that a deal would be reached.
The Pound retreated to just below 1.32 against the Dollar from month highs of 1.3300 while against the Euro, rising to over 1.1280 before retreating. UK GDP was estimated at 15.5% for the third quarter, slightly below expectations of 15.8%. The annual decline was 9.6% and the ONS pointed to a notably weak recovery in investment and momentum slowed for September.
A pullback in the US equity futures drove some haven flows towards the US dollar. This, in turn, further contributed to the offered tone surrounding the GBP/USD pair and contributed to the retracement slide from levels beyond the 1.3300 mark or two-month tops set in the previous day.
Later during the early North American session, traders will take cues from the releases of the latest consumer inflation figures and Initial Weekly Jobless Claims data from the US.
The Euro was unable to make headway in early Europe yesterday amid reservations over its short term outlook. In comments on Wednesday, ECB President Christine Lagarde stated that all options are on the table when looking at measures to counter the pandemic. Commenting also that developments in the exchange rate may have a negative impact on the path of inflation whilst reiterating that fiscal policy had to remain at the centre of the stabilisation effort. The comments overall dampened expectations that the ECB could cut interest rates in the short term. Council member Knot stated that the no options were excluded ahead of the December decision while the Bank of Spain head called for urgent action to stem deflation risks. Expectations of very aggressive measures in December were scaled back slightly, although the Euro continued to edge lower.
As of writing, the Euro currently trades around the 1.1785 against the Dollar.
Data to watch
08:00 - GBP - Prelim GDP
09:00 - GBP - BOE Gov Bailey Speaks
14:30 - USD - CPI
14:30 - USD - Core CPI
14:30 - USD - Unemployment Claims
17:45 - EUR - ECB President Lagrade Speaks
17:45 - GBP - BOE Gov Bailey Speaks
17:45 - USD - Fed Chair Powell Speaks
Posted in Daily Market News on Nov 12 2020