GBP/USD gives ground following bitter US presidential debate

After remaining rangebound through most of Tuesday’s session, the US dollar is gaining ground again this morning in response to a chaotic US presidential election debate.

At the same time Sterling is struggling this morning, with GBP/EUR subdued at €1.0927 and GBP/USD muted at $1.2827. GBP/CAD is flat at C$1.7194, while GBP/AUD and GBP/NZD hold steady at AU$1.8029 and NZ$1.9487, respectively.

Coming up today, the focus is likely to be on the ongoing Brexit trade talks as reports suggest the UK and EU are closing in on a deal.
 

What’s been happening?

The US dollar was mostly flat through yesterday’s European trading session, with investors reluctant to make any aggressive bets on the currency ahead of the first US presidential debate.

This then gave way to some USD strength overnight in the wake of bitter clashes between Biden and Trump, as well as the incumbent President’s refusal to commit to accepting the election result, which fuelled some risk-off sentiment.

The pound, meanwhile, fell back through Tuesday as the currency fell victim to fresh coronavirus and Brexit uncertainty.

This uncertainty is fuelling concerns over the UK’s economic prospects, with the threat of more coronavirus restrictions combined with a possible no-deal Brexit damaging the UK’s economic recovery, spooking many GBP investors.

At the same time, the euro struck higher during yesterday’s session on the back of improving market sentiment.

However, these gains were also tempered after Germany’s consumer price index revealed the country slipped back into deflation this month.
 

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest retail sales release.

This could see the euro accelerate today after August’s figures reported sales growth rebounded strongly in August, snapping two months of consecutive declines.

For GBP investors the focus will remain on Brexit as the UK and EU continue to try and hammer out a trade deal in the final round of talks, with the upside potential of the pound likely to remain limited as traders try and avoid taking out any aggressive bets.

Across the pond, the spotlight will be on September’s ADP employment figures. Could a robust uptick in employment growth lend some support to the US dollar ahead of Friday’s more influential non-farm payroll release?