GBP/USD: UK lockdowns and US election tensions to disrupt the Brexit bounce

Dual Brexit and US fiscal stimulus talks continued to dominate cable's trading, resulting in choppy trading, an eventual breakout to the upside, and a retreat afterward. US politics are set to take over in the pre-elections week, while UK coronavirus cases and lockdowns will probably become more prominent, Yohay Elam, an Analyst at FXStreet, reports. 

Key quotes

“The Brexit saga has been going for over four years, and with two months left until the UK ceases to be a de-facto member of the EU, any headline could rock markets. The end of October was one of the deadlines for reaching a deal, but the data will likely come and go without a deal. Nevertheless, any comment on progress could boost sterling, and a total stall of negotiations would hurt it. 

“The increase in COVID-19 cases and the ensuing lockdowns are moving rapidly. If Liverpool's Tier Three restrictions succeed in flattening the curve, it could serve as an encouraging sign, boosting the pound. On the other hand, if additional regions enter the highest lockdown level, especially London – sterling could suffer.”

“An influx of post-debate opinion polls is likely early in the week. While national surveys grab the headlines, what counts is battleground states. Polls from Pennsylvania – the closest of the northern states that Trump won narrowly in 2016 are of high importance. Florida, the perennial swing state, is also critical as it sends a large number of electors, is highly contested, and counts early votes ahead of election day. If Biden wins Florida, the race is all but over. However, if Trump carries his new home state, the race is considerably closer.” 

“COVID-19 cases are rising in colder states, with the battleground of Wisconsin standing out. Will the disease depress turnout and favor Trump? Will it shed more light on his mishandling of the crisis and push voters toward Biden? The increase is known; the impact remains a mystery.”

“Durable Goods Orders for September are set to print modest changes. Investors are eyeing Nondefense ex-air spending, considered ‘the core of the core.’ These investment figures feed into Gross Domestic Product calculations for the third quarter. After an annualized collapse of 31.4% in second-quarter GDP, a bounce of a similar magnitude is on the cards now. The first release tends to have more impact than revisions and is set to impact future stimulus calculations, allowing it to impact markets despite tensions ahead of the vote.”