GBP: Johnson deadline this Thursday
EUR: Back in the 1.18s
USD: Biden polling only looking stronger
We are into the last week of scheduled Brexit discussions between the UK and EU with the Johnson government’s self-imposed deadline of Thursday looking incredibly close. Sterling ran higher on Friday afternoon on hopes more than expectations that we’re close enough to the deadline that those who have dug their shoes in over issues such as fishing and the ability of government to provide state aid will somehow loosen their resolve.
Of course, Westminster is also focused on increasing Covid-19 precautions with a COBRA meeting this morning and the government set to announce a new tiered system that aims to make the criteria for local lockdowns of pubs, restaurants and other venues clearer. Johnson will announce these plans at around 3.30pm with a press conference to the public at 6pm.
At the moment however, from an economics point of view the one thing that remains clear is that while some parts of the country may be heading back into lockdown conditions similar to the original lockdown, the level of support from government for people’s wages is nowhere near as strong.
The European single currency managed to press higher against the USD on Friday amid its generalised push lower but lost out to a Brexit-enthused dollar. This week in Europe really kicks off later with European leaders meeting in Luxembourg to debate further issues around the region’s budget plans and markets remain positioned to benefit as the single currency pushes higher.
The dollar weakened on Friday with investors further pricing in the chances of a Trump loss in the upcoming US election given recent polls. On Friday, prominent electoral statistics website Five Thirty Eight updated their model to show that they believe Biden to have around an 85% chance of winning the White House with Democrats also having around a 65% chance of taking the Senate and 95% chance of retaining the House.
Of course, their model could be wrong but with 3 weeks to go and Trump around 10 percentage points behind Biden in national polls, it will take a historic recovery by Trump or a surprising failure in polling for the Republicans to hold on to the White House.
As yet, there has been little progress on stimulus measures in the US and headlines that suggest talks have broken down will keep the dollar from losing too much ground in the short term.
China has moved to limit the rally seen in the yuan over the weekend by moving its daily fix lower and removing expensive barriers to allow traders to short the currency. The ensuing weakness has caused the AUD to weaken across the board as well.
We maintain our belief that the CNY will weaken fairly dramatically in the 6 months following the election, with a greater move seen in the event of a Trump win in three weeks time.
Have a great day.