A turbulent week for pound to euro exchange rates was rounded off with increased volatility as we got closer to some firmer news on Brexit, with the pound oscillating 1.5 cents between 1.0927 and 1.1073 on the pound to euro interbank exchange rate.
Looking to the next stages ahead in the Brexit talks, Boris Johnson will be calling with EU leaders this weekend where he will allegedly be pushing for a deal. There has been ongoing talk of ‘landing zones’ and discussions being in the ‘tunnel’.
Any signs of a deal being agreed have been sterling positive, whilst any sign of no-deal has been sterling negative. The pound has been rising against the US dollar this week, moving between 1.2695 and 1.2977 on the pound to US dollar interbank rate, as the optimism has gently built of something more positive.
The weekend’s talks could prove crucial, although we have on the 15th and 16th the latest EU Summit which might well prove more interesting as a time to see consensus on the arrangements. Looking to the previous key moments on Brexit, the pound has been quite jittery and we have in some cases seen movement ahead of key events where the news is decided in advance, or after, where the news is decided after the event.
With the December deadline now just 90 days away, we are very close to a crunch moment on Brexit. Whilst we could still arguably see an extension, this seems quite unlikely based on commentary previously and therefore the potential for a definitive answer seems strong.
A definitive answer of either a deal or not seems crucial to the behaviour of the pound and a topic to be monitoring in the coming days and weeks. Brexit has been a fundamental driver of sentiment for the pound on many occasions and for any clients interested in the pound this week ahead, being kept up to date with the latest Brexit news appears vital.
Countdown to the EU Summit and US Elections
The coming weeks will likely see a renewed focus on the EU Summit, plus also the US election. The news that Donald Trump has caught Corona has seen the pound gain on the greenback, as fresh concern over the US election increases.
Expectations ahead for the US dollar can definitely be related to the election, with a general suggestion that signs of Biden winning would see a weaker dollar according to many estimates. This is because Trump has always been seen as quite pro-business, which would help the economy, and this could influence the US dollar in a positive manner.
However, signs Trump has the virus may have weakened him as a candidate and has given the market some jitters. The prospect of Biden winning is a key factor to help weaken the US dollar, since it makes it more likely the US would then adopt a less conservative spending agenda, which typically would be associated with a weaker dollar.
The Us election is also key for other pairings besides GBPUSD since it presents some opportunities for a global shift on attitudes to risk which can in some cases influence GBPAUD, GBPNZD and GBPZAR exchange rates too.
The future is looking quite uncertain as the election result is by no means guaranteed, and we could see movement in the currency market as investors adjust to the latest news and reposition their funds accordingly.
Looking to the coming weeks, economic data will also be important as the world looks to better understand the Coronavirus outlook in the face of growing worries over rising cases. The threat of lockdowns once again could yet prove pivotal and are also a major point of discussion to be had ahead.
The coming weeks will provide further news on the markets as we get closer to better understand whether we are in the midst of a second or even third wave, depending on how we look at assess the ever changing picture.
The Coronavirus has made the currency markets even more unpredictable and volatile in many respects, and we can help share with you the latest news and provide tools to help provide you make an informed decision and strategy on your transfer.
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