King Dollar is finding it tough going against most of its peers today as the White House and the Democrats edge ever closer to a possible agreement on the new fiscal stimulus bill. Nancy Pelosi is expected to provide more clarity on the real probabilities of a pre-election bill by the end of today, which she set out as the deadline to reach an agreement. But knowing how these political deadlines work, we can assume this could be flexible!
Stocks are finding a bid amongst this positivity, after the sharp selloff yesterday. As hopes of a bipartisan deal before the election had deteriorated recently, it seems perhaps there is not that much currently priced into the market. This should therefore keep the downside for risk assets fairly limited, if the prospects of an agreement eventually fall apart.
Brexit hasn’t delivered too much new today with the EU’s Barnier holding a call with his UK counterpart, Frost. Yesterday’s discussions were described as ‘constructive’ by the UK, but this has still not pushed No. 10 into resuming formal negotiations. This contradictory news flow is par for the course and Sterling markets remain fairly sanguine.
Tight range for GBP
With all the noise from the two different sides in full swing, Sterling is trading in a fairly narrow range. Institutional positioning is also pretty stable at present as investors maintain a wait-and-see approach, though the market is far from pricing in a no-deal outcome. The two sticking points – fishing rights (which account for 0.1% of the UK economy) and the level playing field – remain and it seems that the UK will only return to the negotiating table when the EU relaxes its stance on these two issues.
October has seen Cable so far trade in a pretty narrow range roughly between 1.2850 and 1.3050. The failure for GBP/USD to hold its gains above 1.30 more recently is a cause of concern for bulls in the short-term. With momentum indicators in mid-range, markets await more Brexit developments!
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