IFX Market Report: Monday 26th October 2020

The Pound starts the new week steady, trading above 1.30 against the U.S. Dollar and above 1.10 against the Euro. It was reported in the Sunday Telegraph that the “UK and EU sources effectively setting Halloween, next Saturday, as a deadline to decide whether the two sides will be able to reach a deal”. Putting a deadline on talks is highly likely to intensify the market’s anxieties surrounding Brexit and thus its probable that we could see some considerable price-action.

GBPUSD held firm on Friday, despite depreciating through the session the pair sustained itself above 1.30. The pair opened strong at 1.3078, before closing off the week at 1.3037.

As for GBPEUR, the pair opened at 1.1073 on Friday’s open, before losing momentum in the day closing just above the 1.10 mark at 1.1009.

In the same Telegraph piece, it was said that “90% plus” of the areas making up an agreement have been concluded, with the outstanding issues still in discussion being the future subsidies for UK business, future governance of the trade deal and fisheries. While fishing has been proved to be a key element to a Brexit deal for some EU territories, the main driver of that rebellion, President Macron and France, has shown in the last week they may be willing to back down slightly on the matter in order to secure a conclusive deal. A recent Reuters article notes that France’s Europe Minister Clement Beaune has supposedly told fishermen in Port-en-Bessin (Northern France) last week that they should no longer expect to maintain “the status-quo”.

While Europe hopes to soon come to a conclusion on Brexit, COVID-19 cases on the old continent are spiking and are causing the EUR to weaken. EURUSD spiked on Wednesday trading close to 1.19 but since then the pair has dropped off with cases rising. France reported a daily record of infections on Saturday, only to surpass it on Sunday by reaching a staggering 52,000 daily cases. Spain has also declared a new state of emergency and Italy have put in place additional limitations to help prevent further spread of the virus.

On Friday EURUSD opened just above the 1.18 mark at 1.1810 and was able to retrace some of its losses and climb back to 1.1842 by the close.

On the data front, a light day today – the only releases of note coming from the U.S. in the afternoon, in the form of the Chicago Fed National Activity Index and New Homes Sales for September.

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