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GBP/USD has been rising as hopes for US fiscal stimulus are revived but concerns about UK restrictions and Brexit could bring the pound back down, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“The cable is now rising after the president – still recovering from the virus in the White House – tweeted a series of messages that seemed to backtrack that proclamation. Trump uses equities as a measure of his success and he may have realized the damage done. Moreover, the economy is one point where he is competing with rival Joe Biden. Recent polls have shown a growing chance of a devastating, landslide defeat for Trump.”

“PM Boris Johnson is reportedly considering new restrictions to cope with rising COVID-19 infections. More and more cities in England and Scotland are slapping new measures on their residents. Will London undergo another lockdown? The mere speculation is already hurting the currency.” 

“Hopes for a Brexit breakthrough are diminishing. Simon Coveney, the Irish Foreign Minister who tends to be outspoken on the talks, said that the British stance on state aid is ‘very problematic.’ Moreover, France has pushed the EU toward a hard line on fisheries – a small industry whose political power is outsized in the UK. Overall, there is little going for the pound.” 

“The Fed will have another opportunity to impact markets via the release of its meeting minutes from the September decision. The Fed pledged to keep interest rates at zero for a couple of years but seems reluctant to increase its bond-buying scheme to provide further support. Any hints about futures moves could rock markets, yet the bank is unlikely to say anything that could be seen as intervention ahead of the elections.” 

“Vice-President Mike Pence and Senator Kamala Harris will meet in a televised debate late in the day. Contrary to his superior, Pence is calm and could provide a solid performance that would help Trump shore up some support. Harris, a former prosecutor, may give him a hard time on coronavirus, healthcare, and race relations, but the bar is low for Pence to win by just not being Trump. A tighter race means higher chances of contested elections and lower chances of a generous stimulus bill that Democrats could enact if they win a clean sweep. That could also boost the greenback and weigh on GBP/USD.”