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Currency Market Analysis

Nov 27, 2020 | Currency Market Analysis

Global Themes

GBP

The European Union chief negotiator Michel Barnier is traveling to London today for fresh talks. While the trip is a positive sign, disagreements about fisheries and governance persist. Recent reports suggest talks are "completely stuck" and more headlines are likely to filter out later today. 

A high-level intervention between EU leaders and Prime Minister Boris Johnson is highly likely to trigger a breakthrough, until then the negotiating teams will find they have little room for manoeuvre. A call between Johnson and EU Commission President Ursula von der Leyen is allegedly supposed to happen at some point, but a lack of confirmation keeps investors on their toes. France, Germany, Denmark, Spain, Belgium, Ireland and the Netherlands are likely to take part in the meeting. These countries stand to gain or lose the most from an agreement on fisheries, now a major stumbling block to reach an overall trade deal with Britain. Britain and the EU can still clinch a Brexit trade deal and the shape of one is clear but London will not sign up to an accord at any cost, Prime Minister Boris Johnson's finance minister said on Thursday.

  • The Scottish first minister Nicola Sturgeon called for a second independence referendum "in the earlier part" of the next Parliament term, in her interview with BBC News ahead of the SNP's virtual conference, which starts on Saturday. "I intend to say more about this before the election in our manifesto, but we are still in a global pandemic that I feel a bit more hopeful about seeing the end of than I did even just a couple of months ago.”

USD

The US Dollar index is set to end the week lower as investors seek out riskier assets due to improving risk appetite stemming from prospects of a smoother transition from the Trump administration to a Biden administration. Covid-19 vaccine hopes remains another supporting factor for the Dollar’s poor performance this week. 

The index is set to finish this month lower and if the current trend continues we could expect to see a third quarter of declines for the Index. The move lower has been seen currency markets with EUR/USD and GBP/USD rallying to recent highs of $1.1940 and $1.3397 respectively. However, there are some calls from analysts who are calling for the US Dollar to pull back in the medium term. Looking ahead at a scenario where vaccines are readily available and economies return to normal, the US economy is expected to be one of the most resilient among the more developed countries

  • November has been a turbulent month for EUR/USD with the pair rallying just over 2.9%,  the $1.20 handle remains a large psychological resistance level. Markets briefly breached this level in September this year however prior to that the last recorded time markets closed above the $1.20 handle was Q1 2018.


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