Pound Sterling

Weekly Update: US Election Drama Rocks Markets, Pound Bolstered by BoE

The currency market was infused with considerable volatility this week as US election drama dominated sentiment.

Elsewhere, the Bank of England’s injection of an additional £150bn into the UK economy helped prop up the Pound after concerns grew over delays to a potential UK-US trade deal.

Pound Fluctuates on UK-US Trade Fears

GBP/EUR – Unchanged on the week’s opening levels

GBP/USD – Up two cents on the week’s opening levels

The Pound traded in a wide range over the past week, with some initial gains quickly being reversed as fears over a drawn-out US election result stoked concerns over the timeline for a potential UK-US trade deal. 

However, Sterling then bounced back through the second half of the week, with GBP investors welcoming a larger-than-expected QE expansion from the Bank of England (BoE).

Coming up next week is the publication of the UK’s third quarter GDP figures. While these are expected to show a sharp rebound in economic growth over the summer, any upside in Sterling is likely to prove limited given the UK is facing another contraction in Q4.

Euro Rallies in spite of Europe’s Coronavirus Woes

EUR/GBP – Unchanged on the week’s opening levels

EUR/USD – Up two cents on the week’s opening levels

Despite some concerns over Europe’s coronavirus situation weakening the single currency at the start of the week, the Euro was able to mount a convincing rally.

This saw the single currency bolstered by some weakness in its main rival the US Dollar, as well as data showing the Eurozone narrowly avoided contraction in October.

In focus for EUR investors next week will be the latest ZEW economic surveys, with EUR investors bracing for a sharp plunge in economic sentiment this month in response to new lockdown measures across the Eurozone.

US Dollar Rocked by Fallout from the US Election

USD/GBP – Down one pence on the week’s opening levels

USD/EUR – Down one cent on the week’s opening levels

The US Dollar has experienced notable volatility as a result of considerable drama surrounding the US presidential election.

While confidence of a Biden victory dented the safe-haven appeal of the US Dollar, a tighter-than-expected race and Trump’s threats of legal challenges prompted sporadic jumps in USD demand throughout the session.

Looking ahead, the possibility of legal challenges to the final election result could see investors favour the US Dollar next week, especially if coronavirus developments also start to weigh on market sentiment.

Australian Dollar Jumps despite Skittish Trade

AUD/GBP – Up one pence on the week’s opening levels

AUD/USD – Up two cents on the week’s opening levels

The Australian Dollar has rallied this week, capitalising on the initial bump in market sentiment to climb to a two-week high in spite of setbacks due to jittery mid-week trade.

This rise in the ‘Aussie’ also came despite the Reserve Bank of Australia’s (RBA) decision to slash interest rates to a new record low.

Looking ahead, the focus for AUD investors will be on Australia’s latest consumer and business confidence figures. Will falling domestic coronavirus cases have resulted in a more upbeat outlook?

Key Data

Nov 10 AUD Business Confidence (Oct)

Nov 10 GBP Unemployment Rate (Sep)

Nov 10 GBP Wage Growth (Sep)

Nov 10 EUR ZEW Economic Sentiment Index (Nov)

Nov 10 USD JOLTs Job Openings (Sep)

Nov 10 AUD Consumer Confidence (Nov)

Nov 12 EUR Industrial Production (Sep)

Nov 12 USD Inflation Rate (Oct)

Nov 12 USD Initial Jobless Claims (07/Nov)

Nov 12 GBP GDP (Q3)

Nov 13 EUR GDP (Q3)