So… It seems the UK has U-Turned on their initial position 2 weeks ago about another Lockdown. As I mentioned 2 weeks ago, it takes the Government around 2 weeks to change their mind, and here we are, another National lockdown is upon us from Thursday- which will see all non essential businesses close while schools and universities will remain open. This has not come to a surprise seeing as though the rise of Covid cases have been rapid since September and it seems hospitalisations are getting worse again.
It seems the ticking time bomb of the furlough scheme ending has also been extended with Furlough now ending in December- which I am sure is very welcome news to many and I am happy to hear the Government is extending this support through this next lockdown.
So what does this mean for Sterling exchange rates? Well, if we are to look at France and Germany’s lockdown announcement last week, we saw the Euro lose around 200 pips against the Dollar- and Pound to Euro rates rose above 1.11 for the first time in a long while. In light of this, I expect Sterling to be sold off from the Asian session on Sunday evening, we will see on Monday morning where prices end up, but I see no reason to be bullish while this lockdown goes on.
Our only saving grace here could be a Brexit deal in mid November, however with the Covid situation getting worse around Europe and the UK, it would not come as a surprise to me if they extend the Brexit deadline again, but let’s see what happens.
The next event on our list is of course the US Presidential election on November 3rd – we are not expecting any results until the next day so this week will be very volatile, last week we saw equities sold off across the board and this may continue until we have a result- currently the polls are showing Biden should win the popular vote against Trump, which Clinton did as well- it is the Electoral College which really makes the impact and the Senate. Right now the polls are showing Biden should also win this, but I am always sceptical and I will go out on a limb here and say I am personally expecting a Trump win- I don’t have any preference as I live in the UK but the data I am analysing suggesting this will be the case.
The reality of the results is this- if it’s a Democrat win- stocks go up. If it’s a Republican win- stocks go up. If however it is Contested, then yes, stocks will go down due to the prolonged uncertainty. I do not see Trump happily walking away if he loses the vote,
This is going to be a very busy week, and we are going through a stressful time, so to all of my clients and Friends I encourage you all to keep communication open with friends and family, lockdowns are not easy but please do what you can to keep your mind positive and your body healthy through this- I am always at the other end of the phone if you need a quick chat about the market to distract from what is going on around us!