Currency Note

US election, BoE decision and lockdown 2.0 this week

By Christopher Nye November 2nd, 2020

An extremely eventful week lies ahead of us, which could bring significant movements in the currency markets. The US election will take place tomorrow and we may know the result by Wednesday morning. Currencies across the globe could be impacted by any election news, especially as the race is looking tight in key swing states.

The Bank of England meeting and the FOMC meeting are also due to take place this week. Considering the increase in COVID-19 infections globally and the impending ‘lockdown 2.0’ in England, it will be interesting to hear what officials have to say about the impact on economies.

Please do ensure that any upcoming transactions are protected against sudden market movements on election night. Secure a fixed exchange rate now with a forward contract; call your Business Trader on 020 7898 0500 to get started.

For more information about how the US election could impact currencies, take a look at our handy election guide.

GBP: Pound weaker ahead of lockdown 2.0

The pound is weaker against both the euro and the dollar this morning as the uncertainties of the week ahead weigh. On Saturday evening, it was announced that England will enter a month-long lockdown from Thursday, which is starting to put pressure on sterling as the markets assess the economic impact. This has overshadowed positive Brexit developments which manifested at the end of last week.

The Bank of England’s monetary policy decision will also take place on Thursday. The Bank is already expected to increase its quantitative easing target and considering the latest lockdown measures, it will be interesting to hear if there is any further discussion surrounding negative interest rates.

A series of Purchasing Manager’s Index (PMI) data will be released today and Wednesday, which measures growth in the services and manufacturing industries.

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EUR: PMI data and ECB speeches this week

The euro is stronger against the pound but weaker against the dollar this morning, as it struggles with the after effects of the ECB’s meeting last week.

President Christine Lagarde said that while Q3 GDP data might have been better than expected, Q4 growth will be on the downside. Officials paved the way for additional stimulus in December as several countries across Europe increase restrictions.

There will also be a series of PMI data released for the Eurozone this week as well as retail sales on Thursday. We’ll also see speeches from several ECB officials in the wake of their meeting.

USD: US election tomorrow

The dollar is stronger this morning, benefitting from its safe-haven status ahead of the US election tomorrow. More lockdowns across Europe have given the greenback a boost.

There’s a last-minute push for votes today ahead of the election tomorrow. Joe Biden still leads in the polls, but the race is tight in key swing states. It’s thought that there could be a delayed result due to the large number of mail-in votes. This scenario is likely to benefit the dollar.

The FOMC meeting and non-farm payrolls are also due this week, but election news is likely to have the biggest impact in the markets.

The US election is just a day away and we could see significant currency fluctuations on the night. Read our handy election guide and ensure that your transfers are protected from movements in the currency market.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.