IFX Market Report: Monday 14th September 2020

The pound has found some stability to start off Monday, following an abysmal run of form last week. Sterling made substantial loses over the course of September due to a lack of development on Brexit negotiations, EU retaliation to the Internal Market Bill, and AstraZeneca’s disappointing results with the Phase 3 COVID-19 vaccine trail.

Kicking off today, the House of Commons will debate Boris Johnson’s controversial Internal Market Bill. Many oppose the bill as it quite clearly violates the Withdrawal Agreement and allows for a customs border on the Irish Sea. When the bill was first brought to light, the EU opposed it, and enforced an ultimatum to the British government – rescind the bill by the end of September of face unfavourable sanctions.

The House of Commons will this week vote on amendments to the bill before it goes to a committee. If the bill goes through and triggers any additional animosity between the UK and EU, we will likely see the pound depreciate.

GBPUSD lost some ground on Friday, falling into the 1.27 range for the first time since late July. The pair opened the session trading at 1.2851, before dipping in the day and closing off at 1.2784.

As for GBPEUR, the pair also depreciated on Friday, but managed to stay above the 1.08 handle. The pair started the day at 1.0853, but after some GBP end-of-week selling, closed off the session at 1.0806.

Friday proved to be a rangebound session for EURUSD, the pair not seeing much price action in the day. After opening at 1.1841, the pair lost just over 10 pips, closing at 1.1830.

Interestingly, over the weekend we had some comments from key ECB figures regarding the euro’s recent strong form. ECB President Lagarde’s statement that the ECB “do not target the exchange rate” was echoed by Vice President Luis de Guindos and Chief Economist Philip Lane, both noting that the euro’s value impacts inflation.

On the data front, nothing market-moving expected to be released today. Tomorrow however, the UK employment data is released in the morning and will be closely watched. Followed by the ZEW Economic Sentiment Index from Germany and the Eurozone at 10:00.

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