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GBP/USD is holding above 1.31. According to FXStreet’s Analyst Yohay Elam, sterling has three reasons to rise and one uncertainty that could ruin the party.

Key quotes

“Friday is the day when Chief EU Negotiator Michel Barnier and his British counterpart David Frost usually take stock of the talks recent reports have pointed to a fresh impasse. If officials express frustration, the party could be ruined for sterling. However, if they stay silent or report progress, it would only add fuel to the fire.”

“The vote count continues and Democratic nominee Joe Biden has higher chances of clinching the presidency – as early as Friday. The risk comes from Trump’s unsubstantiated claims of fraud, rejected by several Republican politicians. Markets lean toward a decision rather than a contested election, and the safe-haven dollar is down.”

“Sterling continues benefiting from the Bank of England’s decision to enlarge its bond-buying scheme by £150 billion, more than expected. In the UK’s case, more monetary stimulus means more fiscal stimulus. Rishi Sunak, Chancellor of the Exchequer, announced that the successful furlough scheme will continue in its generous 80% mode through March. The ‘Old Lady’ also refrained from setting negative rates.” 

“The Federal Reserve stated that the pace of the recovery is moderating, expressed concerns about the resurgence of the virus – and opened the door to expanding its own Quantitative Easing program. In America’s case, more monetary stimulus means additional funds for stocks, adding to the risk-on mood and weighing on the dollar.”