Buck eases. Pound falls, Brexit nightmare

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Buck eases. Pound falls, Brexit nightmare

OCTOBER 16, 2020

The U.S. Dollar improved throughout the week but may close the week without further advancement as a few items are tackled to finish the first half of the month.

Overview

One thing that is starting to look clearer is that we may not have a path to a spending bill from Congress and markets seem to have made peace with that while focusing primarily on good corporate news that can propel them higher and the effects to be had as European cities go into restriction mode because of COVID-19’s rampant wave. Secondly, we are dealing with reaction and guessing the strategy behind U.K.’s Prime Minister Boris Johnson as he is, once again, threatening to end negotiations and just prepare the country for a no-deal Brexit.

In terms of economic progress in the U.S., September Retail Sales showed much better than expected performance advancing 1.9% instead of just 0.8% estimated. We have Industrial Production out at 9:15 AM and the University of Michigan Consumer Confidence at 10 AM. We could perhaps see a Friday with little action as a shaky market gauge how successful can the recovery continue to be in Q4. The buck is trying to squeeze out a half percent gain for the week, no advancement is ever guaranteed.

What to Watch Today…

  • No major events scheduled for today

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October Monthly Outlook

EUR  

The Euro lost about 1.0% of its value in the past seven days, coming down from multi-month highs as the excitement over fiscal integration in the EU diminished.

The European Central Bank is ready to use all needed to defend the stability of the financial system, a robust rescue package is being implemented diplomatically, yet COVID-19 reemerged as a thorn on Europe’s overall recovery while traders must focus on the effects of curfews and in some cases lockdowns. EU Commission President Ursula von der Leyen had to leave the much-awaited EU Summit as a member of her staff contracted the disease.

We have efforts to push out a vaccine and the deadliness initially faced has come down, but no real consistency can be expected until we tackle and eliminate the medical threat we have in front of us.

GBP  

The Pound fell as the roller-coaster of Brexit tug-of-war remains. In the latest episode, Prime Minister Boris Johnson stated that the U.K. must prepare for a no-deal situation as the two sides cannot find an agreement on free trade in the future.

David Frost, the chief U.K. negotiator, wants to achieve an “Australia-like” deal. We shall see where we head with this proposal, but for Michel Barnier, EU chief, there is room for improvement, and hopes talks “intensify.”

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