Sterling seems to be starting off the trading week on the up and pushing higher around 1.3040 against the Dollar and 1.1044 against the Euro. While the Dollar remains pressured, fears of a no-deal Brexit and the economic burden of COVID-19 keeps the UK currency unstable but near multi-day high. As a result, traders will take cues from BOE Governor Andrew Bailey and UK PM Boris Johnson for fresh impetus.
With ongoing trade discussions and neither the EU nor the UK wishing to step back on any of their strong points, another round of failed talks concluded last week. With fisheries and a level playing field being the latest spoiler. As a result, the UK government only has one week to get a deal agreed before the proclaimed October 15th deadline.
UK Prime Minister Boris Johnson is also set to make a statement to MPs today giving details of new restrictions to slow the spread of coronavirus in England. The report will outline the new tier system and restrictions on pubs and restaurants that could be closed in parts of northern England and the Midlands while also discussing a ban on overnight stays.
The US dollar lost its footing at a critical support as bears sabotaged the bullish prospects for the immediate future, from a technical perspective. Fundamentally, the speculation of a US election outcome of a Blue wave victory has undermined the greenback.
The Dollar across the board also edged lower on news indicating a possible resumption of US stimulus talks. However, before the election outcome is known, investors may have to face the risk of a contested result and the impact on global growth of rising COVID-19 cases in Europe and elsewhere.
With nothing scheduled data wise in the US calendar, all the attention is expected to be on the IMF/World Bank Virtual Annual Meeting. In the next week, investors will remain focused on the CPI figures (Tuesday), the Fed’s Beige Book (Wednesday), Initial Claims and the Philly Fed index (Thursday), Retail Sales and the advanced U-Mich index (Friday).
The Euro may have a tough time extending its two-week winning streak against the Dollar as the Eurozone’s inflation expectations have diverged lower from the US inflation expectations.
The Euros recovery rally, which started on September 25th is showing signs of possible stalling. Currently trading around the 1.1815 mark, having pushed up from 1.1612. The pair jumped 0.98% last week as the safe-haven Dollar took a beating across the board amid risk-on action in the global equities.
On the docket today, is just the German Wholesale Price Index for September. The pair could, however, take cues from the ECB President Christine Lagarde's speech, due at 11am UK time where she is expected to deliver the banks willingness to provide additional stimulus and add to bearish pressures around the common currency.
Data to watch
11.00 EUR - President Larage Speaks
17.00 GBP - BOE Gov Bailey Speaks
Posted in Daily Market News on Oct 12 2020