The UK presented draft legislation that upends some of the Brexit Withdrawal Agreement, and the EU responded angrily. The news overwhelmed everything else and pounded the pound. Central bank decisions, data and coronavirus are set to join the drama in moving the pound, FXStreet’s analyst Yohay Elam informs.
“The Brexit crisis is set to remain left, right and center. If both sides calm and work toward a solution, sterling has significant room to rise. On the other hand, if the EU begins publishing details of potential sanctions – or if Johnson insists he is doing the right thing – there is more room to fall.”
“Another political development is the fate of the furlough scheme. The government pays workers unable to perform their jobs most of their salaries. The successful plan kept Brits attached to their positions, but it expires in October. Chancellor of the Exchequer Rishi Sunak said the scheme is unsustainable but is yet to lay out a plan on how to phase it out.”
“Economists expect the BoE to leave its interest rate unchanged on Thursday as the bank is in a ‘wait-and-see’ mode. It is also projected to maintain the bond-buying scheme at £745 billion. Any increase in printing money could boost sterling – as it allows the government to further stimulate the economy – contrary to the pound's reaction in pre-pandemic times.”
“August's retail sales figures, due out on Friday, may have a more significant impact than the BoE, especially if it falls as expected. The end of the ‘reopening effect’ – which unleashed expenditure held back beforehand – and the resurgence of the virus have likely depressed shopping. Any surprises could rock sterling.”
“The US elections are entering high gear, and Trump may opt to shift the focus away from his mishandling of the coronavirus crisis – especially after admitting he played it down. If relations with China worsen, the safe-haven dollar could rise.”
“The Fed is forecast to leave the interest rate unchanged in its upcoming decision but will publish new growth, inflation, and unemployment forecasts. The rapid fall in joblessness – 8.4% in August – will likely prompt an upgrade. Reporters are set to ask Powell about the additional stimuli, such as setting negative rates or acting to depress the yield curve. The Fed previously dismissed these ideas. If Powell opens the door to more action, the dollar could fall.”
“Several hours before the bank announces its decision, the US publishes retail sales statistics for August. Did the lapse of federal unemployment insurance – a weekly top-up of $600/week – impact spending? That is an open question. The economic calendar is pointing to moderate increases after a catch-up in previous months. The dollar is set to react to any figure.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.