GBP: Sterling volatility depressed
EUR: Coming lower as we wait on Macron announcement
USD: Building strength as markets fall
Sterling is not doing too much at the moment and seems happy to be in that kind of mood for now, shifting at the whim of other currencies as opposed to data from the UK. To be fair, there is no data at the moment and the political pause caused by half-term is not helping sterling volatility. Some sterling markets are moving however with options markets shifting to forecast a less pessimistic view of GBPUSD in the coming weeks albeit seemingly on the idea of a weak USD following the US election in 6 days’ time.
As yesterday, there is not much out there to shift sterling out of this range at the moment, but Brexit headlines will always be lurking in the wings.
European stock markets are moving lower this morning after further declines yesterday with measures by governments to contain the virus further the main market focus. An unconfirmed report from a French TV station yesterday told us that France is considering a fully national one month lockdown to get a grip on the infection rate, whilst there are rumours of Germany closing restaurants, bars and hotels for the same reason.
Macron is due to speak this evening at around 8pm CET.
As mortality rates have started to climb, market concerns as to whether flexible lockdowns are enough to contain the spread will be put to the test alongside just how much governments are prepared to stump up to support businesses and consumers.
This risk is starting to pull the single currency lower and we would expect greater depreciation into and after tomorrow’s ECB meeting.
In an environment of weakening equities it is the dollar that is in the front seat to build on recent gains although continual belief that the election next Tuesday will see Democrats take the Senate and the White House is limiting USD gains.
The lingering desire and hope for some form of stimulus deal from Congress continues to push the USD lower as well although our expectations remain that a deal is not done.
With 6 days to go until the US election you would think that it would be stump speeches and polling numbers leading the market’s nose, but Covid-19 and the fears of lockdowns are governing movements this morning. Oil prices remain lower as investors recognise falling demand from industrial and travel sectors which alongside greater supply should keep prices depressed. We see no reason to shift our bearishness on commodity currencies in the short term.
Have a great day.