The greenback sold off on Monday as investors express concern over a lack of progress regarding the next round of US stimulus. The pound rose above $1.30 while the EURUSD pair jumped towards $1.18. The gains were trimmed late in the day as a sharp equity market sell-off drove participants into the safety of the buck.
Over the weekend, the Democrat lead negotiator and Speaker of the House, Nancy Pelosi gave a 48-hour deadline to the Republicans in which to strike a stimulus deal. This has created a new wave of nervousness across markets with the chance of a package being passed before the election becoming thinner and thinner. Stock markets took a beating yesterday afternoon/evening as the harsh reality kicked in. It looks like both sides are playing politics ahead of next month’s election. The US dollar may well see further inflows if the 2 parties cannot come to some form of agreement.
Domestically, between new restrictions and the Brexit stalemate, sterling may begin to come under pressure. It’s been incredibly resilient of late, but that cannot last forever give the nature of the current phase of negotiations (i.e. both sides pushing each other for concessions). If no positive developments are seen this week then the pressure will likely start to take its toll.
Today’s economic calendar is sparse. We’ll observe speeches from both Bank of England and Federal Reserve members. Additionally, there’ll be building and housing data released from the US in the afternoon.
8:31am, October 20th 2020
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