22nd October 2020
USD swoons as stimulus bets increase
Sterling was the best performer globally yesterday with the market taking two comments from the EU negotiators positively. It was confirmed yesterday afternoon that EU chief negotiator Barnier will travel to London Thursday for talks. He also suggested that an agreement is “within reach.”
Earlier the EU had made clear that it is increasingly focused on UK sovereignty and see room for compromise on the Level Playing Field and fisheries, alongside being ready to talk about legal texts. These are not new pronouncements but symbolise a willingness to talk that has been lacking from recent conversations.
A weakening dollar also helped the pound with GBPUSD finding itself at the highest level for 6 weeks. We do not believe that sterling belongs up here given the real risks of a no-deal Brexit but have to acknowledge that markets now view the possibility of a deal more positively.
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