GBP: Brexit conversations restart tomorrow

EUR: Needs broader risk sentiment to rise alongside it

USD: Trump tax reports have little impact

Sterling

It’s difficult to not start every morning report on a Monday with a meaningless warning that those involved in sterling in some way should be preparing themselves for another political and therefore volatile week, but this week really does have the firepower to upset the apple cart.

Brexit negotiations between the UK and EU begin again in Brussels with a little over a fortnight until the Johnson government’s self-imposed deadline of October 15th that would signal a closure of discussions and both parties resigning themselves to the UK leaving the EU without a deal.

Much closer to home, the government is under pressure to finesse its recent lockdown changes given the chaos at universities and the side-effects of the 10pm curfew on pubs on local transport systems. Conservative as well as opposition MPs are looking to defeat the government on the prospect of further lockdowns.

The Times are reporting this morning that “Ministers are preparing to enforce a total social lockdown across much of northern Britain and potentially London” … which would mean … “All pubs, restaurants and bars would be ordered to shut for two weeks initially. Households would also be banned indefinitely from meeting each other.” Merseyside, the North-East and Lancashire are first in line, with the capital “in the balance.”

The Times’ reporting on government plans has been pretty spot on in the past few weeks.

Euro

EURUSD looks happy in the 1.16s and while a dip into the 1.15s looks likely we cannot see the single currency collapsing from here. European Central Bank policymakers have been clear in their desire to push the euro lower via speeches and other verbal interventions and we can expect similar language from President Lagarde at appearances today and Wednesday.

A further run higher for the single currency is very dependent on a wider global recovery and the production of a viable Covid-19 vaccine.

US Dollar

Politics is once again set to dominate the USD this week with the first Presidential debate of this election cycle due in the early hours of Wednesday morning. We would therefore expect that trade from Wednesday onwards will largely be spent analysing who ‘won’ the debate and the dollar shifting on those thoughts.

Wider moves for the USD – either upwards or downwards – look less likely at the moment, especially given the distance between democratic and republican lawmakers over stimulus.

Headlines over the weekend that revealed the extent to which President Trump has avoided paying an appropriate level of tax on earnings has not had an effect on markets. The President dismissed reports that he paid $750 in taxes in 2016 and 2017 as “fake news”. I doubt such a revelation will change polling that much.

Elsewhere

AUD spent a lot of last week on the backfoot with a particular down day coming following the decision of strategists at Westpac to predict the Reserve Bank of Australia would cut interest rates once again at their meeting on October 3rd. Over the weekend that expectation has been pushed out to November, allowing the AUD to push a little higher through the overnight Asian session.

Have a great day.