GBP/USD: Brexit and fiscal stimulus headlines to rock the cable to the downside
|GBP/USD has risen after Andrew Bailey, the Governor of the Bank of England (BoE), painted a relatively optimistic picture of the economy. However, the 1.30 level seems out of reach as Brexit bring the pound back down, Yohay Elam, an Analyst at FXStreet, reports.
Key quotes
“BoE’s Bailey said that he does not expect the economic impact of the second COVID-19 wave to be as in the spring. Bailey also insisted that the BoE still has ammunition – a reminder that the ‘Old Lady’ is examining the technicalities of setting negative rates, a specter that weighed on the pound in the past. In his interview with the Yorkshire Post, he added that coronavirus is adding significant uncertainty.”
“According to reports, Britain is set to abandon talks if no progress is made by October 15, when the EU Summit begins. This threat could be part of London's posturing, an attempt to push Brussels to concessions. Nevertheless, both sides are at loggerheads over state aid and fisheries – a sector worth less than 1% of the UK economy, but that has an outsized political impact. Talks will likely be extended beyond the next seven days, but such an announcement is unlikely now – and nor is a breakthrough on the sensitive issues.”
“President Donald Trump cut off talks with the opposition back on Tuesday but has been suggesting ideas for a minimal accord later on. However, Dems have no reason to let go amid broad public support for a large package, and with little time left until the elections. An adverse headline from Washington could boost the greenback.”
“Vice President Mike Pence clashed with Senator Kamala Harris in a relatively civil VP debate. While both candidates talked about the topics at stake, they did not present the cases for themselves. Both Trump and Biden are elderly men, and the VP may be forced to step in. Political analysts seem to disagree on who won the debate, but most conclude it will have little impact on the vote.”
“The Federal Reserve wants more fiscal stimulus but is reluctant to rock the boat ahead of the vote. The meeting minutes from the recent decision echoed recent messages – lower rates for longer, yet without imminent new monetary support.”
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