- GBP/USD lifted by USD weakness or absence of negative rate talk
- Brexit back in focus as a soft deadline approach
GBP/USD LIFTED ON USD WEAKNESS & ABSENCE OF NEGATIVE RATE TALK
The Pound has rallied around 200pips versus the USD since the Bank of England monetary policy decision. The BoE boosted QE by more than expected but the lack of commentary surrounding negative rates has supported GBP. Furthermore, the larger QE package gives the Bank of England the possibility to speed up the pace of asset purchases if needed. Markets continue to price in a Biden win in the US elections bringing the USD under pressure with the greenback testing key support at 92.50.
BREXIT BACK IN FOCUS AS A SOFT DEADLINE APPROACHING
With the BoE in the rear-view mirror, attention can turn back to Brexit with a soft deadline approaching (Nov 15th). Intensive talks have so far seen a lack of progress on 3 key issues. It wouldn’t be surprising if talks fail to meet the deadline. Talks are likely to continue however, the base case scenario is that a deal is ultimately reached.
GBP/USD: USD is likely to be the key driver for the pair given the US Election. USD support at 92.50 hold is so far, however, a meaningful breakthrough could send GBP/USD back to the October high at 1.3177 before attempting to reclaim the 1.32 handle. Near-term support is at 1.3075.
EUR/GBP: The bias remains a fade on rallies in cross towards 0.9060-70. Choppy trading is likely to persist for EUR/GBP as Brexit differences remain, gains have been well-capped from 0.9060-70, the 100DMA and while a break below 0.90 has seen a lack of follow-through. Risks are tilted to the downside towards the year-end.