IFX Market Report: Friday 16th October 2020

After a dramatic fall yesterday, Sterling has regained some of Thursday’s losses, and is holding steady as we go into Friday’s open despite Brexit uncertainty heightening. As the EU summit concludes today, market participants can expect increased volatility in the Pound as we go into the weekend.

Opening the session on Thursday GBPUSD started strong at 1.3000 but quickly depreciated as the market becomes increasingly worried about the risk of a no-deal Brexit. Shortly after the open, cable had fallen way down into the 1.28’s, before managing to claw back some of those losses, and close at 1.2915.

GBPEUR also devalued in yesterday’s session but managed to stay in the 1.10 range. The pair opened at 1.1077 before finishing the day off at 1.1038.

Reports would suggest that there have been little developments between the UK and the EU on future Brexit trade deal. In response to the EU statement last night to invite “the Union’s chief negotiator to continue negotiations in the coming weeks”, David Frost proclaimed his frustrations when he noted that he was “disappointed by the European Council conclusions on UK/EU negotiations” and was “the EU is no longer committed to working "intensively" to reach a future partnership as agreed with Ursula von der Leyen”.

The change in language from the EU in their statements, replacing “intensify” with “continue”, many argue is because the EU believes not enough concessions have been made from the UK to enable negotiations to enter the final ‘tunnel’ stage of discussions. Frost noted how he was “also surprised by the suggestion that to get an agreement all future moves must come from UK”. Frost’s EU counterpart, Michel Barnier responded to the UK asserting that the EU “remain determined to reach a fair deal. We will do everything we can - but not at any price. Our team will continue intensive discussions over the coming weeks. We remain calm, united, determined.”

As COVID-19 infections in Europe are on the rise, EURUSD is just about keeping itself in the 1.17 range. The pair opened yesterday at 1.1736, before closing off the session at 1.1700.

On the data front, this morning the EUR Inflation report were published, with a core headline figure of 0.2%. Then this afternoon we have Retail Sales, Industrial Production and Michigan Consumer Sentiment from the US.

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