ACM Update Monday 2nd November 2020

We are hitting the ground running in November, with what will be the start of a massive week for the FX markets globally.

Stateside we have the long-awaited arrival of the US election on Tuesday, with Americans having cast around 100 million votes even before the day itself. Trump and Biden continue to blitz as many swing-states as possible before election day, which itself could turn into election week due to the sheer scale and system for postal votes. As with any drawn-out election result, this could well have a detrimental effect on the Dollar. Currently most models are expecting a Biden victory, but the outcome is still far from certain in this day and age. The graph below demonstrates recent movements.

GBP-USD

In the UK, Boris Johnson announced Lockdown “Part Two” for England over the weekend, after mounting pressure from a variety of different angles to take action. The hospitality and entertainment sectors already struggling, have just been dealt another massive blow with further shutdowns, and an 11th hour extension to the furlough scheme. What shape recovery will we see now?

The expected four-week lockdown until 2nd December will leave less than a month before the looming Brexit deadline. After four and a half years since the initial vote, it doesn’t bode too well for a favorable resolution in that period of time. Will the government be successful in their “fishing” for a last-minute deal or are we going to see a tough end to the year for GBP?

In terms of market data releases, the second half of the week is the busiest with the Bank of England meeting taking place on Thursday at midday (GMT). Pressure is mounting for the bank to inject more money into the economy in terms of quantitative easing, to guide the UK through the next stage of the pandemic. Friday lunchtime sees the release of the Non-Farm Payrolls data. Current expectations are of a figure around 600k, however the last two months have fallen short of the forecasted number.

GBP and USD dependent trades will be open to a large amount of volatility this week especially, however it is a big week wherever you look. Protecting yourself against market movements is important even in a stable market, which this week is unlikely to be! We have a variety of different ways to protect you so please make sure to get in touch with the trading team to discuss how we can limit your risk.

written by

David Comber

David Comber is a Senior FX Trader at Aston Currency Management