The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
- Pound fluctuates on Brexit and coronavirus developments.
- New lockdown measures put UK on path to contraction in Q4.
- GBP Monthly lows: €1.09, $1.28, AU$1.79, NZ$1.91, C$1.69
- GBP Monthly highs: €1.12, $1.32, AU$1.85, NZ$1.97, C$1.73
The pound has traded in a wide range over the past four weeks as Brexit and rising coronavirus cases dominated headlines.
This saw Sterling fluctuate through the second half of October amidst some back and forth over Brexit trade negotiations, with a particular low coming after Boris Johnson declared that talks were ‘over’.
While Johnson’s proclamation proved to be a little premature as both sides agreed to restart talks, struggles between the two sides to close gaps on fishing rights and state subsidies kept a cap on the pound through October.
Further tempering Sterling’s gains last month was also a worrying surge in UK coronavirus cases, which forced the government to follow some of its European neighbours in imposing a new month-long lockdown.
Despite England going back into lockdown, so far the pound has fared quite well in November, showing some convincing gains against both the euro and US dollar.
November’s uptrend in Sterling comes in response to some upbeat market sentiment, with the pound receiving a particular boost from positive coronavirus vaccine news. This is on the assumption that as the UK’s economy has been ‘disproportionately hit by the virus, it will also be disproportionately helped by a vaccine’.
The Bank of England (BoE) has also aided the pound’s advance, with the announcement of a £150bn expansion of its quantitative easing programme, and refrain from discussing negative interest rates also cheering GBP investors.
Looking ahead to the remainder of November and beyond, it's likely that Brexit will continue to act as a key catalyst for GBP exchange rates, with the pound poised to surge if the UK and EU can reach a trade deal in the coming weeks.
However, the failure to reach an agreement could send Sterling into a nosedive due to the threat of a no-deal Brexit.
GBP investors will also be paying close attention to upcoming UK data releases, particularly November's PMI figures as they seek to gauge whether the new lockdown will have put the UK on track for a double-dip recession this winter.
On top of this, there is also the question on whether the UK’s lockdown could be extended into December, causing even more damage to the UK economy during the key Christmas sales period.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)