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British Pound Latest: US Dollar Driving GBP/USD Gains, EUR/GBP Upside Capped

British Pound Latest: US Dollar Driving GBP/USD Gains, EUR/GBP Upside Capped

2020-11-06 09:00:00
Justin McQueen, Analyst
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GBP/USD, EUR/GBP Price Analysis & News

  • GBP/USD Boosted on USD Softness & Lack of Negative Rate Talk
  • Focus Returns to Brexit With Another Soft Deadline Approaching
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GBP/USD Boosted on USD Softness & Lack of Negative Rate Talk

The Pound has seen a near 200pip rise against the USD since the Bank of England monetary policy decision. While the central bank had boosted QE more than consensus, but in line with source reports, the fact that there was little commentary regarding negative rates, had been enough to support GBP. Alongside this, the larger QE package also gives the Bank of England the option to speed the pace of asset purchases if market functioning were to deteriorate. Elsewhere, as markets continue to price in a Biden presidency the USD continued to come under pressure with the greenback testing key support at 92.50.

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Focus Returns to Brexit With Another Soft Deadline Approaching

With the BoE now out the way, market participants can refocus on Brexit with yet another soft deadline approaching (Nov 15th). That said, with intensive negotiations so far making a lack of progress on 3 key issues, do not be surprised if talks fail to meet the deadline with EU sources already hinting as such. In turn, a back and forth between the UK and EU is likely to remain in the short-term, however, my base case scenario is that a deal is ultimately reached.

GBP/USD: In the immediate term, the USD side of the equation is likely to be the key driver for the pair amid the backdrop of the US Election. Pivotal USD support at 92.50 holding so far, however, a firm break below can be enough to propel GBP/USD back to the October peak situated at 1.3177 with a bid to reclaim the 1.32 handle. Near-term support in cable is back at 1.3075.

GBP/USD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% 5% 2%
Weekly -10% 4% -2%
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EUR/GBP: The bias remains a fade on rallies in cross towards 0.9060-70. Choppy conditions are likely to persist for EUR/GBP given that differences remain of key Brexit issues, allowing traders to fade any short term spikes that occur in the cross. Thus far, gains have been well-capped from 0.9060-70, which coincides with the 100DMA and while a break below 0.90 has seen a lack of follow-through, risks are tilted to the downside towards the year-end.

EUR/GBP BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% 9% 9%
Weekly 35% -25% 3%
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