GBP/USD slips below $1.31 as markets await Brexit update

The pound was back on the defensive on Thursday, with the currency unable to sustain its best levels in the absence of any positive Brexit news.
 
Sterling is struggling for direction so far this morning, with GBP/EUR flat at €1.1069 and GBP/USD muted at $1.3062. GBP/CAD is rangebound at C$1.7177, while GBP/AUD and GBP/NZD hold steady at AU$1.8347 and NZ$1.9564, respectively.
 
In the spotlight today we have the Eurozone’s latest PMI releases. Will a contraction in economic activity this month see the euro retreat this morning?
 

What’s been happening?

After soaring higher on Wednesday, the pound found itself running out of momentum yesterday, undermined by some profit taking as well as the absence of any news coming from the resumption of UK-EU trade talks in London.
 
Sterling was shielded from any substantial losses by Chancellor Rishi Sunak’s unveiling of new stimulus measures aimed at protecting jobs hit by stricter coronavirus restrictions, on hopes it will avoid the UK sleep walking into an unemployment crisis this winter.
 
At the same time, the US dollar firmed through Thursday’s European session as fresh doubts of a US stimulus package being agreed before the election revived market risk aversion.
 
The euro, meanwhile, was placed on the defensive yesterday as EUR investors were unnerved by a startling rise in coronavirus cases across the Eurozone, with markets fearing more restrictions are likely as Germany reported a record rise in daily cases and France passed the one million mark in total infections.
 

What’s coming up?

Top of the agenda in today’s session will be the publication of the Eurozone’s latest PMI figures.
 
With a second wave of coronavirus cases currently sweeping through the bloc, and restrictions getting notably stricter in recent weeks, economists are forecasting the Eurozone’s private sector will have slipped back into contraction this month.
 
As such, we are likely to see the euro come under some significant pressure this morning as October’s preliminary PMI releases will stoke fears that the Eurozone’s economic recovery may have already ground to a halt.
 
For GBP investors, the UK’s latest PMI figures will also be in focus this morning, although their impact on the pound could prove limited should any Brexit headlines emerge.
 
Closing out the session will be the publication of the US Markit PMI figures. While not as influential as the ISM release, a robust October report may lend some strength to the US dollar today.