GBP: Sterling bid up on legal text progress

EUR: Happily sat in a range

USD: Trump vs Biden at 2am BST tonight

Sterling

Sterling pulled a little higher yesterday as traders decided it was time to back the pound on reports that the EU is prepared to work on the legal agreements needed for a trade deal. Once again, we view this rally with suspicion and while the UK and EU will need a legal agreement before any trade deal is signed, the fact that conversations have moved on to this does not mean that previous concerns over the UK’s Internal Market Bill have gone away.

Parliament is set to vote on that once again in the coming days although we are still not at the point wherein that bill becomes law and an unbelievable Brexit headache.

Euro

It was another day of considered trade for the single currency. EURJPY has continued to consolidate at current levels which will be taken by markets as a sign that currency markets are happy with equity markets also taking a pause given their run lower since the beginning of the month.

Reports that there is disagreement on the European Central Bank over the need for further stimulus shouldn’t come as a surprise; if all of the ECB’s board were in favour of additional monetary policy support it would likely only be as a result of lower provision previously.

US Dollar

By this time tomorrow President Trump and Vice President Biden will have concluded their first presidential debate, commentators will be discussing who ‘won’ and markets will be moving as investors overlay their expectations on to the dollar, US debt and global equities.

Dollar bulls will be hoping that Trump’s performance allows for a further tightening of the polls in the coming six weeks as, without a Trump win, it is difficult to see overt dollar strength through the end of the year. A strong Biden win will cause markets to price in chances of a Democratic clean sweep – White House, Senate, House of Representatives – and although we see that as a low probability event, any move towards it would likely be seen as a dollar negative.

I’ll be tuning tonight at 2am; it really has the potential to be one of the defining television moments of the decade. If you are unable, or let’s face it unwilling, to get up at that time of the morning then a full round up will be available on our blog tomorrow morning.

Ahead of the debate the dollar looks like it may stay sold with portfolio rebalancing flows dominating as the month and quarter come to an end.

Elsewhere

Markets are happy to take the opportunity to catch their breath ahead of the Presidential event risk overnight and most pairs remain happily in previously established ranges.

Have a great day.