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Pound buffered by BoE and Brexit concerns

currency-newsPound buffered by BoE and Brexit concerns
The pound remained on the defensive at the end of last week’s session, amidst lingering disappointment over the Bank of England’s (BoE) latest rate decision, as well as fresh Brexit uncertainty.  

Sterling is mostly muted so far this morning, with GBP/EUR subdued at €1.1649 and GBP/USD flat at $1.3485. GBP/CAD and GBP/AUD are holding steady at C$1.6800 and AU$1.8218 respectively, while GBP/NZD has retreated to NZ$1.885.

Looking ahead, a speech by Federal Reserve Chair Jerome Powell is likely to act as a key catalyst for the US dollar today.

What’s been happening?

The pound continued to slide on Friday following the BoE-driven selloff after the central bank left interest rates unchanged.

Reports that the UK could suspend parts of the Northern Ireland protocol by invoking Article 16 further dented Sterling over the weekend, causing fears over a potential collapse of the UK-EU trade deal.

After strengthening through early trading on Friday, the US dollar retreated later in the session.

Market mood improved sharply and weighed on safe-haven demand for the US dollar after the US non-farm payrolls report revealed a bumper 531,000 jobs were added to the US job market in October.

Risk-on trade received another boost later in the day following reports that Pfizer’s antiviral pill to treat Covid-19 reduces deaths and hospitalisations by 90%, reducing the likelihood of lockdowns and restrictions.

Meanwhile, the European Central Bank’s (ECB) divergent stance from the Federal Reserve weighed on EUR sentiment at the end of the week, but the narrowing gap with the BoE provided support against GBP.

The euro came under some pressure through Friday’s European session after German industrial production for September unexpectedly contracted for a second consecutive month, and Eurozone retail sales also missed forecast with a -0.3% reading.

What’s coming up?

Turning to this week, the spotlight at the start of the session will be a speech by Fed Chair Jerome Powell.

Could some hawkish remarks by Powell lend some strength to the US dollar later this afternoon?

The focus for EUR investors in the first half of the week will be the publication of Germany’s latest ZEW survey, with the euro poised to fall if economic sentiment in the Eurozone’s largest economy continued to deteriorate this month.

Meanwhile, GBP investors will be bracing for the publication of the UK’s latest GDP figures in the latter half of the week. Will a notable slowdown of domestic growth in the third quarter, undermine the pound?
Philip McHugh

Philip McHugh

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)

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