The EU leaders are meeting at Brussels for a two-day meeting on October 15 and 16. Trade negotiations will remain in the headlines and keep the EUR/GBP exchange rate volatile.
Much expectation is placed on the discussion to take place this week between leaders in the European Union and the United Kingdom. The Pound against the US Dollar continues to move sideways.
Forex market investors continue to hope for a Brexit deal to take place. If talks are positive, it will weaken the Euro and the Pound Sterling.
The coronavirus continues to affect people across the globe. US President Trump recovers from the coronavirus after being infected last week.
Fisheries will Dominate Negotiation Between the EU and the UK
Fisheries will remain in focus in the Brexit talk this week. The fisheries issue plays a significant role in many EU countries. The United Kingdom is battling towards protecting its coastal communities. The UK’s fishing industry has been affected after the agreement with the EU was given access to British waters, claims Britain.
The EUR/GBP closed at 0.9061 on Friday, 9 Oct. After testing high levels in September, the Euro to Sterling continues to move downwards. Previously, it held on to its support at 0.9050 levels. As it is critical support, the Euro against the British Pound currency pair will remain volatile at this level. It will move along the lines on which the Brexit negotiations proceed.
Coronavirus cases continue to increase in the Eurozone. Restrictions imposed are on the increase to curb the infection. Bars in Paris and nightlife in Berlin are restricted.
The President of the European Central Bank, Christine Lagarde expressed concern over the situation in the zone. The currency has to stabilize, she claims.
Optimistic about Brexit
The GBP/USD closed at 1.3046 on Friday, 9 Oct. it is on an uptrend after breaking past its resistance zone at 1.300. The British Pound went below the 1.30 levels in the first week of September. It was in consolidation for about a month below this level.
Political uncertainty has prevailed over the Brexit issue for four years. It is now drawing towards a close and the October 15 EU Council summit will determine the end of the negotiations. Unemployment rate data in the United Kingdom data, expected this week, may not be good as the economy has worsened.
Awaiting a Package
The EUR/USD is at .1824 on Friday, 9 Oct. It has tested support levels at 1.1629 and bounced back from this level. If it continues to move past the 1.1850 level, it can shoot upwards to 1.1850 levels and further up to 1.1900 levels. Currently, it is at levels reached in May 2018.
Though the EUR currency rate against the US Dollar is not yet out of the woods, it has seen a good bounce from these levels. The Euro against the US dollar exchange rate is above 100 and 200 SMA. In September, it saw a peak of 1.1870 and 1.1920 last month. 1.17 continues to remain a strong support area.
With the coronavirus infection on the increase, trading in the EUR/USD continues to remain slim. Positive talks on the post-Brexit transaction period will affect the currency. The European Union says a deal has to be reached by the end of the month or by early November.
ZEW Economic Sentiment for the Eurozone is expected this week, along with the German ZEW Economic Sentiment.
President Trump’s Competition with Biden Intensifies
The US Dollar Index is at 93.06 levels
The USD is moving towards the multi-low levels at 92.20 levels. There is a possibility of a downtrend to extend.
The market expectation of Joe Biden winning the election is on the increase. With presidential elections just ahead, the Greenback is under pressure. The Republicans and Democrats held talks about the next stimulus package, but President Trump put an end to talk about the stimulus. The Vice Presidential debate to take place between Kamala Harris and Mike Pence is an important political event to watch this week.
The sooner the package arrives the better will be the growth in the economy, feel experts. The dollar may fall once the financial package arrives, but it would improve the stock market.
Meanwhile, coronavirus infections are on the increase in various states in the US. The economy requires further government support for further growth, state experts.
Initial jobless claims last week have fallen above expectations of 820k. It has declined to 840k from 849k. Once the first stimulus package runs out, economic recovery may come down too.
At critical Resistance Level at ¥106
The USD/JPY lost just 0.1%, while the EUR/USD lost 0.4%. The US Dollar to the Japanese Yen continues to face resistance at ¥106.00 levels. We are likely to move towards ¥ 105 levels. Stimulus continues to play an important role in the yen.
The foreign exchange market continues to rely on political outcomes this week.