IFX Market Report: Tuesday 10th November 2020

After the announcement of a possible Pfizer COVID-19 vaccine yesterday, global risk sentiment soared, seeing gains for risk-sensitive currencies such as Sterling and the Australian Dollar. Naturally, safe-haven currencies such as Japanese Yen and Swiss Franc depreciated as the markets became increasingly hopeful. This news, combined with optimistic sentiment concerning a post-Brexit trade deal, has enabled Sterling to get ahead of its peers, opening this morning against the Euro firmly in the 1.11 range, and above 1.32 against the U.S. Dollar.

It is well-known that fishing rights is proving to be a crucial obstacle for both the UK and EU on securing a post-Brexit trade deal. Yesterday in a BBC interview, Environmental Secretary George Eustice gave Sterling a boost as he claimed the Government was open to a “sensible approach” over fishing. Mr Eustice noted that he understood “that there are still differences. There are still some obstacles to overcome but I think there’s now some goodwill on both sides to try to progress things. Lots of work going into that. On fisheries, we’ve always been open to doing a sensible approach looking potentially at agreements that might span a couple — three years for instance… we’re going to be sensible in how we approach this but making sure that we have control of our own waters again and controlled access to our waters has always been a red line for us in these negotiations.”

After weeks of deadlock on the issue of fishing, markets saw Eustice’s comments as constructive, and combined with positive risk sentiment, we saw GBP rise as a result. GBPEUR opened yesterday at 1.1072 and was able to break through the 1.11 barrier and close comfortably above that mark, finally finishing the day off at 1.1123.

Cable also saw some upside during the day, breaking beyond 1.32 during the session despite not having the reliance to finish above that handle. GBPUSD opened Monday at 1.3157 and closed the day at 1.3138. It is worth noting that the pair opened and is holding strong above the 1.32 mark this morning.

After testing the 1.19 handle yesterday afternoon, EURUSD took a steep decline as markets saw a considerable Euro sell-off late on in the session. The pair opened the day at 1.1883 but was unable to sustain itself before Monday’s close, finishing off the day at 1.1811.

On the data front, this morning from the UK we have Employment Change, Average Earnings, Claimant Count Change and Unemployment Rate. Following these economic releases, we have ZEW Economic Sentiment Index from both Germany and the Eurozone as a whole.

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