Two months ago when UK Prime Minister Boris Johnson told the public that a trade deal had to be reached by the EU summit on the 15th October or the UK would crash out of the EU without a deal, you would have thought that sterling exchange rates would have been extremely volatile now that it’s the 28th and no deal has been reached. But in fact sterling has been range bound against the euro and US dollar for some time.
This week UK and EU negotiators have been doing everything they can to thrash out a deal and over the last 24 hours there appears to have been some progression. Bloomberg were reporting yesterday that a deal is likely to be reached early November due to a ‘shift in the mood’ from both sides according to their sources. In addition, Simon Coveney the Irish Foreign Affairs minister announced that he believes a deal between the UK and EU is likely.
With the EU now setting a deadline for the middle of next month, it appears that we could finally see some major volatility for sterling exchange rates. Forecasters are suggesting a rise in sterling off the back of a deal and a fall in sterling if the UK decides to crash out. For clients that are buying or selling sterling in the weeks and months to come, I would recommend getting in touch with the trading floor to discuss your options.
In other news yesterday Chancellor Rishi Sunak announced that he will set out a one-year spending plan on the 25th November. The statement is set to cover the amount of money Government departments will have to fight the pandemic, funding for the public services sector and infrastructure investment. For clients that are involved in sterling exchanges keep a close eye on this release as the news could impact sterling value.
Over the last 48 hours we have learned that German Chancellor Angela Merkal and French President Emmanual Macron have ordered national lockdowns in a bid to fight the Coronavirus pandemic. Both leaders in recent weeks have shown concern about the rise in infections and believe now is the time act. People will now have to stay home, unless they need medical care, buying essential goods such as food or have no way of being able to work from home.
As you would expect World stock markets have tumbled over the last couple of days as investors are concerned that other countries will follow suit in the days and weeks to come. We can’t forget that the first lockdown drove the Global Economy into the deepest recessions we have seen in many years. Off the back of the news history repeated itself and we have seen the US dollar benefit with EURUSD falling by a cent since the start of the week, however EURGBP movement has been limited.
Eyes will now turn to other European countries such as Italy. With cases surging and new restrictions in place in certain areas, could Italy be the next country to face a full lock down? As its been heavily documented withing Foreign Currency Direct market report, lockdowns are not good for the economy, therefore the more countries throughout Europe that enter, the more pressure we could see mount on the single currency.
Now that the US election is less than a week away, all eyes turn to President Donald Trump and Democrat candidate Joe Biden. History tells us closely fought elections can cause market volatility, therefore for clients that are converting US dollars in the weeks and moths to come, this election could have an impact on the exchange rate you receive.
Currently Joe Biden is still leading Donald Trump in the polls. Recent numbers suggest that Biden is currently around 51% and Trump 42%. However, with many swing states still up for grabs and the polling numbers not to be trusted if you look at previous elections, anything could happen come the 3rd November.
The last rallies will be held over the next couple of days and even former President Obama has found himself on the campaign trail in the state of Michigan in a bid to help his fellow Democrat win the swing state. Where as President Donald Trump has found himself in Arizona, again doing everything he can to turn Arizona red. For more information on how the US election could impact your currency exchange, feel free to contact the trading floor.
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