GBP/USD: Between hope and despair in both Brexit and US fiscal talks

Optimism on Brexit with pessimism on fiscal talks – or the other way around – is what moved GBP/USD, and will likely continue moving forward. Brexit, the Fed minutes, UK GDP and US politics are all eyed this week, FXStreet’s analyst Yohay Elam reports.

Key quotes

“If PM Boris Johnson allows for a compromise on state aid, the controversial IMB, or any other topic, the pound could rally strongly. On the other hand, that IMB violates the concessions he made in 2019 regarding the status of Northern Ireland.”

“As temperatures fall and people spend more time inside, UK COVID-19 could rise  – and with them depressed activity from consumers and potentially additional restrictions. After several days of infection records, the daily statistics figures may have a growing impact on sterling.”

“The economic calendar features two speeches from Andy Haldane, Chief Economist at the Bank of England. The influential central banker has been relatively upbeat of late. In his second speech on Friday, he may respond to new GDP figures for August. Markets expected an ongoing recovery in the summer, with an increase of 5.7% in output after 6.6% in July. Manufacturing production figures are also of interest.”

“The more immediate concern for investors is the fate of the stimulus bill. Will elderly elected officials practice social distancing and leave Washington without a deal? Or is the focus on the disease going to sharpen minds and push politicians toward approving more relief? Markets will not have to wait for too long to receive answers on that front.” 

“After the last pre-election NFP, the focus shifts from economic data to the Federal Reserve. The bank's meeting minutes from its last pre-election rate decision will likely reiterate the pledge to keep borrowing costs depressed for several years. Regarding bond-buying, officials seemed reluctant to increase its pace, urging politicians to act. The document may shed light on the Fed's potential to make a move on that topic anytime soon.”