09/11 – Markets sell USD as Biden takes election win

GBP: Last week for Brexit negotiations

EUR: People starting to call EURUSD above 1.20

USD: Dollar looser as Biden victory confirmed

Sterling

Sterling has been helped by the weaker USD and the positivity in global stock markets and Brexit headlines for the time being are also adding a little bit of poise to the pound. A conversation between PM Johnson and EU President Ursula von der Leyen over the weekend reiterated the need for a redoubling of efforts from negotiations which restart in London today.

With a firm date set of an agreement by this Sunday, time is of the essence and with the political dial changing in the US the UK will know that a no deal outcome imperils trade with the US as well as the EU.

Our webinar on November 20th will take you our reaction to the decision of the EU and UK, what your business may need to do to be able to transact with the European Union moving forward, how to protect your finances from swings in currency markets and where opportunities may lie in our new future outside of the European Union.

As always our webinars are free to attend but space is limited and you can register here ( https://equals.email/t/5CSB-A83O-2VNLD7-72YYQ-0/c.aspx )

Euro

The single currency has remained pretty quiet over the weekend but EURUSD has obviously cracked higher as trade-weighted USD slips. As we noted last week, we are getting close to levels that historically have pushed the ECB into commenting around the strength of the single currency in a bid to curb a further push higher.

Given the single currency hasn’t spiked against the JPY, GBP and CHF then that ECB pressure may be a while off. Some analysts expect EURUSD to push towards 1.2160 in the coming weeks given the USD weakness we are currently seeing and so those ECB fears are not going to disappear anytime soon.

US Dollar

Stocks are higher and the USD is lower this morning after confirmation that Joe Biden will become the 46th US President after victory in last week’s election.

While the Trump campaign have yet to concede defeat and the risk of a contested result via the courts remains high, markets have taken a view on the evidence currently being presented and the prospect that the Democrats could still take the Senate after neither of Georgia’s Republican senators drew a majority on Election Day, sending both of their races to special rematches in January. This is a low probability outcome however.

Of course, all of this comes at a time where Covid-19 infections are continuing higher in the United States and the need for a stimulus package is becoming all the more necessary. It is going to be very difficult for a plan to be voted through in the current ‘lame duck’ session and this could be the issue for the dollar moving forward.

Elsewhere

The Biden victory is further strengthening the Chinese yuan this morning following the Chinese currency’s best week for 3 years last week. The wider belief remains that emerging markets should outperform in the coming weeks given lower Covid-19 infections locally and the belief that stimulus will eventually flow from the US.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.