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GBP/USD has been on the back foot as the safe-haven dollar gains following the presidential debate. The pound’s failure to benefit from upbeat GDP figures also points lower, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“For markets, the 90-minute televised debate turned from ugly and chaotic to ominous for the fate of the world’s strongest country and largest economy. President Trump refused to say if he would accept the election results and also seemed to encourage a white supremacist group. Fears of a contested election and a constitutional crisis sent stocks down and the safe-haven dollar higher, pushing GBP/USD lower.”

“Sterling had a chance to recover after the UK published final Gross Domestic Product figures for the second quarter. The initial report of a 20.4% coronavirus-induced collapse was replaced by a fall of 19.8%. A higher base would help the British economy recover. However, the pound’s failure to bounce exposes its weakness.”

“Apart from the outsized impact of the debate, GBP/USD is also struggling due to Brexit concerns. Hopes that the EU and the UK would enter a negotiating ‘tunnel’ – a term referring to intense talks – diminished. While many do not see a deal until the last minute, there were reports about progress on trade topics.” 

“Talks between Republicans and Democrats remain deadlocked and the chances of a new fiscal package seem to be diminishing as the clock ticks down to election day. The ugly debate and the battle over nominating a new Supreme Court Justice to lower the chances of a deal. In turn, that could boost the safe-haven dollar.”