GBP

Trade negotiations with the EU continue to make little progress. However, Biden’s victory in the US Presidential election will mean a less accommodating White House from the UK perspective, and may prod Boris Johnson’s government towards the modest trade deal we expect. Markets seem to agree and Sterlinghas performed well since the US election. A key milestone is the EU council meeting on Thursday, so we expect to see some progress in the discussions this week.

EUR

Worsening COVID news from the Eurozone seems to have taken the wind out of the Euro’s rally, in line with our forecasts. Eurozone industrial production numbers for September came in under expectations, adding a bit to the general gloom. However, last week bad contagion numbers out of the US balanced this out somewhat and the Euro ended the week more or less unchanged against the US dollar. With little key economic data out this week, ECB speeches and communications will take center stage, as markets prepare for the key ECB meeting in December where additional easing measures are almost certain to be announced.

USD

Markets continue to come to terms with the likelihood of a Biden presidency combined with a divided Congress for at least the next two years. While it is not entirely out of the question that the Democrats may take both Senate runoffs in Georgia, it is more likely that fiscal stimulus will be limited by a Republican-controlled senate. We maintain a bearish stance towards the US dollar in the long term, particularly against the EM currencies that sport good fundamentals.

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