Pound firms on Brexit hopes as negotiations extended

The pound strengthened on Friday as a sense of optimism over UK-EU trade talks lifted GBP exchange rates.

Sterling is slipping slightly this morning, with GBP/EUR edging lower at €1.1013 and GBP/USD holding at $1.2914. GBP/CAD is weakening at C$1.7157, while GBP/AUD and GBP/NZD are steady at AU$1.8022 and NZ$1.9464, respectively.
 
Coming up today, the health of US President Donald Trump continues to fuel market uncertainty ahead of the election less than a month away, while renewed Brexit uncertainty could give the pound a boost.
 

What’s been happening?

The pound firmed on Friday on reports of progress in UK-EU trade negotiations.
 
Sterling received support after German Chancellor Angela Merkel expressed optimism over Brexit trade talks, believing a deal can be reached while negotiations are ongoing.
 
This came ahead of Boris Johnson’s meeting with European Commission President Ursula von der Leyen on Saturday, where it was decided to extend Brexit negotiations for a further month after they agreed enough progress is being made.
 
Meanwhile, the US dollar experienced volatility as Donald Trump tested positive for coronavirus on Friday, causing equity markets to fall and giving the ‘Greenback’ support due to increased demand for safe-haven assets.
 
Added to this, the latest non farm payrolls showed far fewer jobs were added to the employment than were expected, raising more question over the US economy’s recovery.
 
The euro trended lower at the end of last week following the Eurozone’s weaker-than-expected consumer price index, which showed the bloc fell into deflation with a -0.3% year-on-year reading for September.
 

What’s coming up?

The focus for investors today will remain on Donald Trump’s health following treatment for coronavirus over the weekend.
 
Uncertainty still surrounds Trump’s health despite the President’s appearance outside hospital, but market sentiment has lifted as a result, weighing on safe-haven USD demand. Added to this, hopes of a coronavirus stimulus package remain alive after US House speaker Nancy Pelosi said progress is being made.
 
For GBP investors, Brexit headlines will likely continue driving movement in the pound as optimism firms GBP exchange rates. With further high-level talks to come today as Michel Barnier visits Angela Merkel, the pound could continue strengthening on reports of positive progress.
 
In the Eurozone, this morning’s retail sales data for August and final services PMI for September will likely drive some EUR movement. Meanwhile, rising coronavirus cases and more restrictions in Europe could weigh on euro sentiment.