GBP/EUR recaptures 1.10 as Boris Johnson extends Brexit talks deadline

The pound closed Wednesday’s session higher as the currency was turbocharged after Boris Johnson indicated his Brexit deadline could be pushed back.
 
Sterling appears to be consolidating these gains this morning, with GBP/EUR stable at €1.1068 and GBP/USD flat at $1.2991. GBP/CAD is rangebound at C$1.7091, while GBP/AUD and GBP/NZD tick up to AU$1.8294 and NZ$1.9589, respectively.
 
Looking ahead, the latest EU summit will be centre stage today as leaders will discuss Brexit as well as Europe’s coronavirus response.
 

What’s been happening?

The pound experienced dramatic swings in movement yesterday as a result of heightened Brexit uncertainty.
 
This initially saw Sterling fall at the start of the day amidst reports EU leaders will deem that progress in Brexit talks is ‘still not sufficient’ for a deal at today’s EU summit.
 
However, the pound mounted a startling comeback, closing the session almost 1% higher after the UK government signalled its 15 October deadline to find a trade deal was a little more flexible than previously indicated.
 
At the same time, the euro was mostly rangebound through Wednesday’s trading session, amid concern for new restrictions being imposed across the Eurozone in an attempt to halt the spread of the coronavirus, as well as the bloc’s weaker-than-expected industrial production figures.
 
The US dollar, meanwhile, was on the back foot yesterday, undermined by fading hopes for a US stimulus deal as well as uncertainty over what a possible Biden presidency would mean for the US economy.
 

What’s coming up?

Turning to today’s session, the focus undoubtedly looks to be on the latest EU summit of leaders, in which Brexit will feature prominently.
 
While the UK’s signal that today’s meeting is no longer a clear deadline has eased some of the risk surrounding the event, we could still see some volatility in the pound depending on how optimistic the EU’s negotiating team is regarding a potential deal.
 
The EU summit will also be a key focus for EUR investors today as EU leaders are also set to discuss how to better coordinate their response to Europe’s second wave of coronavirus infections. Could this include talk of more fiscal stimulus measures?
 
Finally, in the spotlight for USD investors this afternoon will be the publication of last week’s initial jobless claims. This could apply some more pressure to the US dollar if another lacklustre drop in claims adds to concerns over the health of the US job market.