The pound managed to recover nearly all this week’s losses yesterday, as it rebounded back above 1.34 against the dollar – hitting its highest point this week. Unsurprisingly, post-Brexit trade talk updates were responsible for the resurgence. The all-important breakthrough moment remained elusive, but news that Boris Johnson was travelling to Brussels to have dinner with EU Commission President Ursula von der Leyen yesterday was well received – as were his comments before setting off, telling MPs “a good deal is still there to be done”. Hopes that the Brussels meeting would not prove to be the last supper were also boosted by the UK government’s decision to drop elements of the Internal Markets Bill that had unsettled the EU.
German Chancellor, Angela Merkel reminded everyone that a deal would not be on the menu last night. Instead, if the meeting proved a success, negotiators from both sides would resume talks to break the deadlock. Speaking to the EU’s 27 heads of state and government, she said there remained a chance of a deal, but “I don’t think we will know by tomorrow if this will happen or not.”
In the end, the three-hour dinner – which was also attended by the UK’s chief negotiator Lord Frost and the EU’s Michel Barnier – only managed to serve up a pessimistic outlook. The chances of an agreement now appear remote after both sides suggested “large gaps” remain, before confirming talks will continue today, with a “firm decision” on a deal or no-deal by Sunday. The pound didn’t find the contents of the meal particularly palatable, causing the pound to dollar rate to weaken overnight.
The UK currency received a further blow this morning when it was revealed that UK Gross Domestic Product (GDP) growth almost ground to a halt in October, as fresh lockdown restrictions hammered businesses. The latest figures from the Office of National Statistics show the economic recovery has lost momentum following the record 19.5% crash in April – GDP ticked up 0.4% in October, down from a 1.1% growth in September.
Vaccine and US Stimulus Optimism Weaken Dollar
The dollar’s stride was broken yesterday following a three-day rising streak – giving the pound vs dollar rate further support in the build-up to the meeting in Brussels. Positive COVID-19 vaccine news, and prospects of more US fiscal stimulus, lifted risk appetite – tripping up the dollar.
It’s a busy day in the economic data calendar on both sides of the Atlantic. In the US, a slew of data is scheduled for release. The most influential for the dollar is the Consumer Price Index excluding Food and Energy – a measure of price movements by comparing the retail prices of a representative shopping basket of goods and services.
Get in touch using the form below to see how these data releases could impact your currency exchange in the short term, I’ll be happy to respond personally.