Dollar flat but remains a favourite

Quiet start to week for US dollar

It’s been a little choppy so far today but the dollar is pretty flat at the start of the week. The greenback has been a reliable safe haven this year and last week was no different. Given the level of uncertainty we could see this week, we may see the dollar remain in favour, even as it closes in on the September peak.

The dollar rebound is taking the edge off the sterling comeback, even as talks between London and Brussels progress well. There aren’t too many noises coming from the negotiations, which is encouraging and suggests the time for fighting this out in public has passed and the hard compromises are being made.

The pound is making steady progress against the euro in recent weeks and has found some support around 0.9. A deal should deliver further gains for the pound but upside may be limited by the fact that it’s now assumed an agreement will be struck.

As far as the pound is concerned, whether the UK achieves a Brexit deal will have a significant impact on the economic outlook but unfortunately, it’s not plain sailing if a deal is achieved. The UK fared worse than most during the last lockdowns and given the importance of the services industry, we may see that again over the winter.

BoE expected to hint at further easing

The Bank of England is expected to at least signal more easing on Thursday, if it doesn’t pull the trigger on the spot. The fact that it’s producing new economic projections in many ways makes it the logical time to do so, but then the next six weeks could bring massive changes to the outlook so it may be more sensible to hold off until December, as others are expected to.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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