Brexit Trade Deal Hangs in the Balance as the Forex Market Strikes Back

• The British Leader Arrives for Last-Minute Talks with the EU
• America Closes in on the Economic Boost Agreement
• The Dollar’s Weakness Pushes the Euro Higher

All hopes for salvaging a post‑Brexit trade deal seem to be hanging in the air today, as Boris Johnson heads to Brussels to meet the President of the European Commission for dinner later today. He brings with him many hopes from the GBP foreign‑exchange market, which will certainly be hit if no deal is reached. For now, it remains well supported, as does the Euro, on the back of a weak Dollar, with traders hoping that an American economic boost agreement can be reached.

The British Prime Minister Ready for Dinner Talks with the EU

The United Kingdom’s Prime Minister, Boris Johnson, is traveling to Brussels later today for a dinner with the President of the European Commission, Ursula von der Leyen, which could determine the future of any post‑Brexit trade deal and, along with it, the hopes of many foreign‑exchange traders dealing with the Pound. It is considered unlikely that a deal will be reached immediately today, but the meeting is seen as a final opportunity to work towards an agreement after multiple rounds of negotiations that have reached a deadlock.
The Sterling has remained strong in recent days, aided by a weak American dollar and also by the fact that the United Kingdom this week made some concessions, abandoning the proposed Internal Market Bill, which was highly contentious with the EU, as it would have altered the terms of the Brexit agreement.

America Continues to Close in on the Economic Boost

Both sides in America continued to close in on another economic boost agreement in the aftermath of the COVID‑19 pandemic. This deal appears to be closer with Senate Majority Leader Mitch McConnell adopting a more moderate stance and making some concessions that could pave the way for a deal to be reached.
The hopes for the deal, worth more than $900 billion, have been met with cautious optimism, with American markets continuing to move higher in Wednesday’s early trades. Forex brokers have also noted that this optimism has worked to keep traders from reverting to a safe‑haven dollar again. House Democratic Speaker Nancy Pelosi has also commented that the latest developments are moving forward in the journey to get the bill through Congress.

The Euro Strong Ahead of the ECB Meeting

The Euro continued to stay strong above the $1.21 level, approaching a critical European Central Bank meeting on Thursday. This is the moment when the ECB said it would “recalibrate” its monetary tools during its October meeting. All eyes will be on this by the end of the week.

Markets are confident that there will be no sweeping changes, as the outlook appears to improve with the vaccine rollout getting ever closer. Add to that the fact that they plan to invest up to an additional €500 billion in the emergency asset purchase programme and the possibility of further economic stimulus, and it is clear why traders are waiting anxiously.