IFX Market Report: Friday 20th November 2020

As another week soon comes to a close, Sterling is showing resilience despite the lack of a post-Brexit deal being agreed. Reports suggest that the EU are saying to the UK that they must move towards its position, while the UK is claiming it is up to the EU to make the final compromises. President of the European Commission, Ursula von der Leyen, has noted that “after difficult weeks with very, very slow progress, now we’ve seen in the last days better progress… but there are quite some meters to the finish line”.

Cable was able to finish above where it closed yesterday, despite the pair being unable to break beyond its range. GBPUSD opened at 1.3209 and was able to finish the trading day at 1.3223.

GBPEUR also had a positive day. Opening at 1.1161, just before midday the pair was able to surpass the 1.12 handle but was unable to sustain itself at that range and dipped back into the 1.11’s, before closing the day off at 1.1176.

A Bloomberg article this morning has reported that the EU has warned members that negotiations with the UK have not progressed enough to overcome the main obstacles of a post-Brexit trade deal, prompting three of the bloc’s leaders to call for contingency plans to be stepped up in case there is no agreement. At a meeting in Brussels, Secretary General of the Commission Ilze Juhansone, told envoys from the EU’s 27 member states that negotiations could now slip into December as progress has been slow, according to people in the meeting who asked not to be identified because they weren’t authorized to speak publicly.

Late on Thursday, the leaders of France, Belgium and the Netherlands called on the EU to make contingency plans in case a deal fails to materialize. If this does indeed happen, businesses and consumers will face disruption as tariffs and quotas return – causing all a plethora of problems for both sides.

Despite this, unofficial reports in recent days suggest that both the UK and the EU have privately voiced cautious optimism that a deal could be concluded as soon as next week. The EU briefing to the ambassadors and the comments by the three leaders may be an attempt to pressure the UK government to compromise further before a deal is struck at a later date.

As for EURUSD, the pair showed little volatility on Thursday and continues to trade calmly as we head into the weekend. The pair opened the session yesterday at 1.1835 and closed at 1.1841.

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