The Pound has started strong this morning, extending its gains against both the Euro and the Dollar ahead of the highly anticipated EU summit on Thursday and Friday. The improved sentiment in Sterling is based on the hope a Brexit trade deal is on course to be soon delivered.
At the European Council meeting in the upcoming days, EU states will be asked to consider the current state of negotiations and it is expected to set the scene for a final push for both sides to reach a deal. It is agreed that it is likely a deal will not be reached at the summit itself, rather EU states will agree to an outline of what a trade deal should look like, allowing in turn for EU negotiators to secure such terms within a certain time frame. EU Chief Negotiator Michel Barnier has already asserted that October 31st is the “realistic deadline” for a trade deal to be reached.
Cable has started the week strong, but its weekly performance “will be driven by the outcome of the EU-UK trade negotiations”. On Friday, we saw GBPUSD open below 1.30 handle at 1.2964, before finally finishing the day on the edge of 1.30 at 1.3000 exactly. Economists at Commonwealth Bank have noted that cable could “rally above 1.3500 in the near-term if both parties agree to a deal”.
As for GBPEUR, despite the spike of infections in mainland Europe with 27k reported cases on Saturday in France, and Madrid under localized lockdowns, the Euro had held relatively stable. On Friday, the pair opened at 1.1011 and dipped only slight by the close, finishing the day off at 1.1001.
Across the pond, on Saturday we saw House Speaker Nancy Pelosi and Senate Republicans reject President Donald Trump’s ~$1.8 trillion stimulus package proposal. The proposal is an improvement on the previous offered ($1.6 trillion) but remains well below the $2.2 trillion in the bill House Democrats passed last week.
EURUSD saw more price action on Friday with the pair able to climb back into the 1.18’s. The pair opened at 1.1774 and climbed throughout the day, finally closing off at 1.1818.
On the data front, a very quiet day for G10 releases, with only a speech from the ECB’s Guindoes at 16:00 being the main event of the day.