Pound undermined by fresh Brexit uncertainty

Philip McHugh November 26th 2020 - 2 minute read

The pound trended lower on Wednesday as the currency was undermined by fresh Brexit jitters.
Sterling remains muted so far this morning, with GBP/EUR subdued at €1.1207 and GBP/USD flat at $1.3372. GBP/CAD is rangebound at C$1.7383, while GBP/AUD and GBP/NZD hold steady at AU$1.8157 and NZ$1.9091, respectively.
Looking ahead, the only notable release on today’s data calendar is the minutes from the European Central Bank’s (ECB) latest policy meeting. Will they offer any hints on upcoming stimulus plans?

What’s been happening?

The pound found itself on the defensive again yesterday, coming under pressure amidst renewed Brexit uncertainty.
This came in the wake of comments from the European Commission president, Ursula von der Leyen, as she claimed that the EU is ready for a no-deal Brexit scenario, whilst raising doubts over the progress being made in negotiations.
Sterling’s slide was not helped by Chancellor Rishi Sunak’s 2020 Spending Review, in which he warned that the UK’s economic emergency has only just begun.
At the same time, the US dollar also fell back on Wednesday following the publication of some mixed US data releases.
This came as a worrying jump in initial jobless claims last week, and surprise fall in personal income in October offset an unexpectedly strong US durable goods reading.
The euro, meanwhile, enjoyed some modest gains yesterday thanks to the pull back in the US dollar.
However, limiting the upside in the single currency were some warnings from the European Central Bank (ECB) that the chances of positive growth in the Eurozone in Q4 were slim and that the economic recovery was at risk if governments do not maintain their fiscal spending.

What’s coming up?

Turning to today’s session, the only release of note will be the publication of the minutes from the European Central Bank’s (ECB) most recent policy meeting.
EUR investors will be paying close attention to the minutes as they seek to gain any insight into the ECB’s expected expansion to its monetary stimulus programme next month.
In the UK the focus for GBP investors is likely to remain on Brexit, potentially leaving the pound vulnerable to further losses if headlines regarding a potential trade deal remain broadly negative.
Across the pond, the closure of US markets for the Thanksgiving holiday could result in some thin trade in the US dollar, likely limiting the chances of any substantial movement in the currency.

Written by
Philip McHugh

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