The Pound saw some positive swings yesterday as polls opened in the US Presidential election. Anticipation of a closely contested result meant that fx markets saw some movement and as the USD strengthened against the Euro, the Pound too gave up some of its gains and dipped below the psycological 1.30 level against the USD. Sterling has however reached an 8-week high versus the EUR at 1.1170 (interbank rates) this morning. GBP/EUR last traded at these rates on September 10th.
As the UK prepares to go in to its second national lockdown as of midnight tonight, Westminister have suggested that we should prepare ourselves for further lockdowns and ongoing waves of Covid-19.
Penny Mordaunt, the paymaster general, told MPs on Tuesday that the UK should brace itself for a series of lockdowns. Speaking in parliament, Mordaunt said the government was “hopeful of being able to unlock in December but they are being driven by the data”. She admitted that cases would inevitably rise after lockdown restrictions are lifted. This has led to interesting debate in the Commons around the efficiency of lockdowns ahead of today's commons vote in favour of the four week national lockdown until December 2nd.
Britain yesterday reached a free trade deal with Kenya as we continue to see preparations made for post-Brexit Britain. Agriculture is a key trading sector between the two countries, with the UK importing £121m worth of coffee, tea and spices from the region.
It is now reported that the Prime Minister has signed, or agreed in principle, trade agreements with 52 nations around the world worth an estimated £146billion to the UK economy.
This does little at this stage to abate the ongoing Brexit negotiation as it was confirmed yesterday that the EU Commission has had no response from the UK to its letter of notice around the governments controversial Internal Market Bill. EU advisors argue that introducing this Bill goes against the already signed Brexit Agreement and is particularly controversial around trade with Northern Ireland. UK ministers have already admitted that the BIll will break international law in a "specific and limited way" - it goes against previous legal agreements but only a little bit. As the Bill is due to be debated in the House of Lords later this month expect more focus here.
Of course, the main focus right now for most of the World will be the outcome of the hotly contested Presidential election of 2020.
It is currently too early to say who has won the closely contested race for presidency in the US and it is possible that results may not be confirmed for days with over 99 millions voters using the postal system to cast their choice. Lingering in the background we also have Trump's lawyers closely monitoring results in an effervescent threat from Trump to contest results if we see a Biden victory and they can find a legal basis to do so.
With Biden firmly at the top of opinion polls in advance of polling stations opening in the US, markets yesterday remained reasonably stagnant remembering all too clearly how strong a lead Hilary Clinton was believed to have had four years ago.
Regardless of personal opinions on Donald Trump he has undeniably been a strong leading force over the US economy during his term as President, and from a UK perspective is believed to be a strong ally of Boris Johnson.
A Trump victory is likely to offer more support for GBP as the willingness to negotiate on a favourable trade deal post Brexit is expected to be a bigger priority under the Trump administration and somewhat easier than under Biden. Biden has also warned that he would be unwilling to sign a trade deal with the UK while the controversial Internal Market Bill undermines the Northern Ireland peace process.
As of 8am this morning results were showing 236 vs 213 (reported by the Associated Press) in favour of Biden with further results still to be announced including the key state of North Carolina and over 4 million ballots still to count across mid-West America alone. Nothing is certain at this stage and Trump has again caused controversy this morning by claiming a victory and suggesting a legal challenge is imminent in respect of the postal voting system which is open to fraud, Trump is claiming victory of an election which he has not yet won.
Uncertainty and unpredictability have been present throughout Trumps presidency and currency markets will continue to react to news both in anticipation and upon release. Please call FCD to speak with your Account Manager for up to date information.
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