23/11 – USD starts short week in reverse

GBP: Boris due in Commons at 3.30pm

EUR: Should be able to push higher from here

USD: Only game in town

Sterling

Both risk and Brexit factors are helping drive the pound onwards this morning with GBPUSD above the 1.33 level and GBPEUR into the 1.12s; the dollar is slipping as investors continue to look through the current pandemic infection levels and rates and Brexit optimism is pointing towards a deal being agreed in the coming week or so.

As you can see from the paragraph above there is a lot of hope about, and hope is always a bubble; able to expand rapidly but liable to be popped at any moment. GBPUSD will get really interesting the closer we get to the 1.34 level as a break above that could be a signal to the wider market that there is further to run.

All eyes will likely fall on parliament today with Boris Johnson announcing the next phase of Covid-19 restrictions in England from 3.30pm. Expectations are that gyms, shops and churches will reopen everywhere with the hospitality sector having to wait until Thursday’s announcement of the geographical restrictions to see if they can open. We expect that plans for a loosening of the rules over household mixing through the Christmas period will be announced tomorrow.

Also in parliament today are members of the Bank of England to discuss their most recent monetary policy review which could move sterling into the close of the European session. Their testimony also begins at 3.30pm.

Euro

We continue to remain bullish on the single currency and think that it is just a matter of time until EURUSD breaks above the 1.20 level. Today and tomorrow both PMI and IFO measures of business sentiment will likely show a falling in economic activity in the Eurozone and if the single currency is able to look through that and maintain a level of stability then we can see EUR pushing higher into the end of the year from here.

US Dollar

With the electoral risk of a Trump challenge to the results of the vote three weeks ago now looking almost extinct as a market influence, markets are fully focused on the relative benefits economically and socially of a swiftly rolled-out vaccine. With that in mind, there is really only one way of expressing that in currency and that is a weaker USD.

This is obviously a short week for the US with Thanksgiving on Thursday and most people taking the Friday off too so we would expect the first part of this week to be busy for dollar watchers and we are looking for this USD move to continue through the week although a risk remains in the post-Thanksgiving markets of another jolt higher of infections given people’s travel plans for the holiday.

Elsewhere

AUD remains optimistic given moves in equity markets and we expect it as well as the NZD, NOK and SEK to trace higher over the week although Thursday’s Riksbank meeting is a risk for the Swedish kroner given the constant pricing of further stimulus.

Have a great day.

Thanks for subscribing to our market reports!

You've been added to our Chief Economist's mailing list for his morning reports.

Share:
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.