21/09 – A crucial week begins

GBP: London lockdown?

EUR: Lagarde speaks this afternoon

USD: Supreme court death opens electoral can of worms

Sterling

News is coming thick and fast for sterling at the moment with coronavirus headlines ably distracting from Brexit as we start this week.

EU trade negotiator Michel Barnier has not made clear as yet just what the EU will do with the UK’s Internal Market Bill that is due for a parliamentary vote on Wednesday and hence sterling’s ability to remain at relatively elevated this morning.

Coronavirus restrictions are set to tighten in many parts of the UK in the coming days and while the government has trailed these plans in the press more ably than previous lockdowns the risk remains that the virus is set to damage workers’ ability to turn up at work just as the furlough scheme is set to end.

From a policy perspective, while nothing is on the data docket today, Bank of England Governor Andrew Bailey speaks tomorrow morning on a British Chambers of Commerce webinar and  focus will fall on whether he decides to smooth the language around negative interest rates.

Euro

The euro has not reacted much to the news in the FT over the weekend that the ECB is said to be contemplating extending its current support programs and whether such ‘flexibility’ should be extended to older bond buying programs as well. Such a move would be enough to restart the battle within the ECB over the role of a central bank in an area tied by a monetary union but not a fiscal one.

ECB President Christine Lagarde speaks this afternoon and we will be watching for hints of further EUR weakness.

US Dollar

If markets weren’t thinking about the upcoming US election with a little over 6 weeks to go until Americans go to the polls then the death of Supreme Court Judge Ruth Bader Ginsburg on Friday evening will have sharpened minds. We will cover the fall out from Bader Ginsburg’s death and what it may mean for the election and USD in our weekly election piece that should be on the blog by the end of the day, but for now we see it as something that will muddy the waters with 42 days until election day.

Otherwise the dollar has been largely quiet over the weekend but finds itself on the back foot as we open up the European session this morning as an increased market focus on a second wave begins to weigh.

Fed Chair Powell speaks to Congress tomorrow and will likely be forthright in his belief that the government needs to offer more fiscally to the average American citizen to solidify a recovery that takes all with it.

Elsewhere

Australian dollar news has continued in a positive manner over the weekend as virus cases in the state of Victoria fell to the lowest level in three months and Prime Minister Scott Morrison doubled down on recent comments expecting a strong rebound in jobs growth.

AUD does remain vulnerable to slips in risk sentiment; something entirely possible as we head into the end of the year.

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.