The FX market's demand for safe haven assets pushed the Pound Sterling lower against its US counterpart; for all intents and purposes, the US Dollar is still considered a safe haven currency. Market sentiment has shifted as a result of Europe's resurgence of Coronavirus infections and the new lock down and quarantine measures being put in place in an effort to thwart the spread. This past Sunday, the Italian government initiated new lock down restrictions, and France is due to announce new restrictions soon. In Germany, a draft resolution hints at the Chancellor's plan to begin closing restaurants and bars as soon as November 4th. In the UK, the Prime Minister has thus far resisted the pressure being put on him to enact new quarantine rules; the assumption is that this second wave of Covid-19 is likely to be worse than the initial one.
In London trading as of 10:27 am, the GBP/USD was trading at $1.2971, down 0.5085% and off the session trough of $1.29628. The EUR/GBP was higher at 0.9054 Pence, up 0.2003%; the pair has ranged from a low of 0.90141 Pence to a high of 0.90671 Pence. The GBP/JPY was lower at 135.149 Yen, down 0.8044% and off the session peak of 136.339 Yen.
Dollar Traders Exercise Caution
Despite its involvement in risk sentiment, market players are wary of the US Dollar given the upcoming election and the uncertainty as to which candidate will be victorious in his bid for US President. While most polls show an overall lead for the Democratic challenger, Joe Biden, the accuracy of the polls has been brought into question in recent years, rendering most election watchers cautious, at best. Besides the election outcome, there is still a great worry over the US economy which continues to struggle for traction in the wake of the Coronavirus pandemic. A resurgence of infections across the country is viewed as a worrying trend, especially given the seeming absence of political will by the current ruling party to address the problem. Currency analysts expect to see increased volatility with the greenback and related crosses until well after the election.