Today EU chief negotiator Michel Barnier was due to address EU leaders and update on how progress with the UK/EU trade deal is going, however due to a positive COVID-19 test within the EU negotiating team he will now have to isolate. One of his senior colleagues will now be doing this on his behalf and the tone is likely to set the scene for the performance of sterling exchange rates for the rest of the trading day.
It has been suggested that talks are likely to go into the weekend and will also continue through the early part of next week until a suitable agreement for both sides is reached. This latest news will not be ideal for negotiations as the deadline is fast approaching, however both sides have agreed to push on virtually with a view to getting a deal done.
This week we have heard news of certain compromises that will edge a deal closer, but as of yet we still wait on any official news of real progress and that a deal may be edging closer to the finish line.
As most regular readers will know even the mere speculation of progress on a Brexit deal has been known to give the pound a lift and any news that a no deal has become a higher possibility can tend to weaken sterling exchange rates.
A no deal Brexit would bring further political and economic uncertainty to both sides so it seems apparent that neither want to walk away without a deal, however if you have a currency purchase coming up then it is still key to remember that talks could fall through at any time and a no deal is still a possibility.
With exchange rates moving by the second it really is important to ensure that you have a very close eye on developments both today and moving into net week. Should you want one of our experienced and proactive traders to assist you with monitoring the markets and to explain the various market tools we have at our disposal to help you avoid adverse market movements then feel free to contact us and we will be happy to discuss your specific situation today.
It is also key to remember that euro exchange rates will be impacted by Brexit trade talks, in similar fashion to the pound it is likely that any heightened chance of a no deal Brexit may lead to weakness for euro exchange rates and a deal may lead to euro rates gaining strength.
With the global pandemic having hit many of the key countries within the EU pretty hard, the last thing that these areas need is further economic and political uncertainty as it could be devastating for countries moving forwards.
Spain for an example, with heavy reliance on travel and tourism for income. Events that have occurred during 2020 and the strict travel restrictions across Europe and the rest of the world has led to a huge drop in tourism income, contributing to a surge in unemployment and a huge drop off in overall economic performance.
Today’s briefing of EU leaders by a senior assistant to Michel Barnier, could be key for the euro's performance in the coming weeks, so the tone and the sentiment it brings will have an impact on the value of euro exchange rates across the board.
One interesting point of note regarding euro is that last month, EUR became the most used currency for global payments, knocking the dollar off the top spot for the first time since February 2013. This is no great surprise with trade upheaval, a recession due to the pandemic and plenty of political uncertainty over in the US, EURUSD is up by over 10% from levels seen back in March this year, and should this pattern of euro preference continue over the dollar then we may see EURUSD interbank exchange rates back up above 1.20 in the near future.
It is clear that there is a fairly volatile period up and coming for all major currencies and euro has an involvement in pretty much most major global issues at present, so if you have a euro exchange to carry out in the near future this market is one to watch extremely closely, as there are multiple subjects that could lead to euro volatility at any time in the coming weeks.
The dollar has so far managed to negotiate its way through the unsettled period hanging over its head due to the uncertainty that an election can bring, especially one involving Donald Trump.
With president elect Joe Biden likely to soon to be taking the reins of the country there is no doubt that he has an extremely challenging period ahead trying to negotiate the U.S out of what is likely to be a long and painful economic hangover from COVID-19. First and foremost his role will be to stem the virus from the astronomical number of cases that are being reported on a daily basis over in America
With different measures in place across the States he has a tricky situation on his hands, the US also still needs to work out a course of action on the next fiscal stimulus package, another topic that will be a hot one for USD exchange rates in the coming weeks.
Currently there are two unemployment support packages in the US, in a similar move to the furlough scheme in the U.K, the are the Pandemic Unemployment Assistance (PUA) and the Pandemic Emergency Unemployment Compensation (PEUC).
First and foremost the PUA has already been stopped since July in a number of States leaving many people with very little money to live off of, but more notably the PEUC is due to expire at the end of the year and this support package would lead to roughly 12 million people that are currently not able to work losing their support and aid.
This presents a real problem for the U.S economy which is driven by consumer spending, and it could weigh heavily on economic figures moving through into 2021.
Many have predicted the dollar is due a bad run of form and 2021 could be the year where the tide starts to turn on the strength of the dollar, with a change of leadership and an unsettled economy in the middle of a pandemic it wouldn’t be a surprise to see dollar weakness in the coming months.
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