GBP/USD is caught within a 1.27-1.32 range due to uncomfortably high COVID-19 case counts and greater restrictions and the lack of progress in EU/UK trade talks, as per Westpac.
Key quotes
“Inflation data is unlikely to pose any threats to the UK economy or GBP and so there is little in the way of key hard data over the coming week. The critical issues for GBP near-term will therefore be whether the spread of COVID-19 cases can be contained and how EU/UK post Brexit trade talks progress.
“The recently imposed tiering of restrictions to counter the alarming rise of COVID cases and hospitalisations will take time to show signs of containing the spread of the pandemic. This seems to be unlikely to develop before the end of October. More important will be whether the most restrictive tier of restrictions become more widespread and trigger a second contraction.”
“The timespan for gaining a workable agreement on trade between UK and EU to implement at the end of the current transition period (31st Dec.) is narrowing fast. However, the past two weeks have also seen a narrowing of the discrepancies holding up progress. This week’s EC summit may not find a breakthrough but it may allow for more intense talks on details to begin and so lead to a potential agreement over the coming month. However, uncertainty remains high.”
“Within progress on post-Brexit trade or COVID-19 cases, GBP/USD will be range bound (1.27-1.32).”
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