11/11 – GBP pushes to 2 month high vs USD

GBP: GBP helped by vaccine news more than most

EUR: Confidence slipping Germany

USD: Tipping point for dollar bears

Sterling

Sterling is continuing to beat up on a weak USD pushing to the highest level since early September this morning. These gains are broad and sterling is also moving higher against other G10 currencies as the world starts to price in a recovery led by a vaccine. As we noted, yesterday sterling is one currency that benefits more from a vaccine than most given the poor economics of continual lockdowns in the UK.

At the moment it seems that only Brexit news has the power to dent this rally in the pound across the board with traders targeting the September highs of 1.3482 in GBPUSD.

GBPEUR is another story entirely and without the surplus of risk appetite that vaccine news and a Biden win has given to markets we’d probable be a cent lower. Those in GBPEUR should be thinking about locking in gains as we come into a busy Brexit period

Euro

As above, the euro is eking out a gain versus the USD but has come up against a brick wall in the pound and the commodity currencies. With German business confidence slumping yesterday and a market eager to see just how much stimulus the ECB will add to its bond buying programs, the euro is not in a position for a broad rally and may only be able to extract gains from the haven currencies of the yen, Swissie and USD.

US dollar

Markets remain happy to load up on risk at the moment although the USD’s weakness is not translating to all markets; for every loss it is having against the Chinese yuan it is squeezing out a gain against the Indian rupee.

It really is a fascinating time for the US dollar at the moment; does it weaken because of Biden’s spending policies and a lift in global growth from a vaccine, or do these factors strengthen the US economy first and lead a drive into the USD, not away from it?

These are the questions we’re asking every day and for now the answer remains unclear. Positioning suggests the wider FX community want a weaker USD from here and it remains a market wherein fighting the trend helps nobody. There will be a snapback of USD strength however, and we will only know how large it will be when it happens.

Elsewhere

The NZD is at a 19 month high this morning as traders continue to price out the chances of negative interest rates around the globe. The Reserve Bank of New Zealand clarified in a statement overnight that “rates could be cut if needed” having previously stated that they were preparing for negative rates.

Have a great day.

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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.