IFX Market Report: Monday 23rd November 2020

As we begin a new week, Sterling is trading strong against its peers – surpassing the 1.33 mark against the U.S. Dollar, and beyond the 1.12 handle against the Euro. The market is evidently hopeful that a Brexit deal between the UK and EU will soon be agreed.

On Friday, GBPUSD opened the session at 1.3262. The pair quickly gained momentum and was able to test the 1.33 barrier but was unable to close above that mark. Cable finally ended the week at 1.3293.

GBPEUR also managed to gain some upside at the end of last week. The pair opened at 1.1171 but was able to go beyond the 1.12 mark and sustain itself - finally closing on Friday at 1.1211.

In regard to Brexit, it has been reported that Boris Johnson plans to make a “significant intervention” in the Brexit trade talks this weeks as both sides begin the “final push” before the deadline in eight days’ time. Johnson and European Commission President Ursula von der Leyen are due to speak in order to “clear away the final barriers to a deal” which both the EU and UK now believe is well within reach. Coming to an agreement on both fishing and state aid appear to remain as the two stumbling blocks to a deal, with EU leaders setting a deadline next Tuesday for all remaining disagreements to be solved. Talks are expected to resume on Thursday, thus giving both sides a maximum of six days to agree on a deal before the deadline expires. Many had hoped that an agreement in principle would already be in place by now, but negotiations were set back due to Brussels’ chief negotiator Michel Barnier being forced into COVID self-isolation, thus putting a halt to talks.

One source close to the negotiations said that the enforced break may in fact be beneficial to both sides, as it gives the exhausted teams a chance to “pause and reflect” on how negotiations have gone and how they should proceed in order to be successful. A source from the UK side said that “both sides seem to think we will get there, but nothing is certain and Boris Johnson will not water down his demands in order to get a deal… the negotiations are nearly there on an awful lot of things, but the areas of disagreement – state aid in particular – cuts across a lot of other areas.” They went on to add that “we are not in the final moment yet but this week will see the start of the final push… I would expect that at some point this week the Prime Minister or Ursula von der Leyen will have to make an intervention.”

EURUSD lost some momentum on Friday as the U.S. Dollar saw some demand. The pair opened and 1.1872 and closed not far from that mark, at 1.1856.

On the data front, we have Markit PMI releases from both the Eurozone and the UK. Then in the afternoon we have speeches from Fed members Daly and Evans.

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