Hopes that UK and EU Brexit negotiators could finally make pivotal progress on a Brexit deal this week are keeping the Pound trending with an upside bias this morning. Uncertainty over the US 2020 Presidential Election continues to soften as well, which is limiting the appeal of safe havens like the US Dollar and keeping the GBP/USD exchange rate buoyed.
Last Week: Coronavirus Vaccine News Dominates Markets
Riskier assets like the Pound surged at the beginning of last week, as Pfizer Inc announced effective and safe progress in its coronavirus vaccine trials so far.
Ultimately though, the vaccine rally faded in the middle of the week. Markets became anxious that major economies would still have to face the coronavirus pandemic over a gloomy winter period before a vaccine was ready.
The US Dollar spent much of the week steadying. It benefitted from Yen weakness as investors sold safe havens, but as it is a safe haven itself it saw mixed movement against other majors like the Pound.
Three Things to Watch For This Week
- Brexit Negotiations
Speculation has been rising that the UK and EU will present a Brexit deal of some kind this week. This could give the Pound a considerable boost if it does happen, but if it doesn’t no-deal Brexit fears may creep back and knock Sterling lower.
2. Retail Sales Results
UK retail sales will be published on Tuesday, with US retail sales following on Friday. These stats are likely to be a noteworthy barometer of the health of the UK and US economies amid the coronavirus pandemic.
3. Bank of England Speculation
Upcoming comments from Bank of England (BoE) Governor Andrew Bailey, as well as UK inflation stats, could influence Bank of England easing bets and negative rate speculation if they surprise investors.
This week could be a major week for Pound exchange rates, depending on Brexit developments. The safe haven US Dollar could remain weak if market optimism around the coronavirus vaccine rises again.