GBP Takes Hit With England Set To Go Into Lockdown, Despite Brexit Talks Optimism

GBP has found itself trapped between duelling forces at the start to the week, but selling pressure has prevailed. The imposition of a four-week lockdown across England coupled with broader risk-off feel delivered a blow to the sterling, while positive Brexit news have brought it but some mild relief.

• PM Johnson announced that England will be put under lockdown, starting on Thursday, as advisers pointed to a grim coronavirus outlook. All non-essential retail stores as well as hospitality businesses will be ordered to close until Dec 2, non-work domestic and international travel will be banned, while residents will be asked to stay at home and only leave for specific reasons like work or exercise.
• At the same time, the gov't announced an extension to its furlough programme, which will cover up to 80% of wages of workers affected by the coronavirus pandemic.
• Elsewhere, Cabinet Min Gove said that the lockdown could be extended if data shows that it failed to contain the spread of infections. The Times cited cabinet ministers as warning that restrictions "could extend into the new year, with a brief relaxation over the Christmas period".
• Meanwhile, weekend source reports suggested that the UK & EU have moved closer to striking an agreement over fishing rights, one of the main sticking points in the ongoing Brexit talks. That said, disagreements remain over other issues, including the level playing field for businesses. Negotiations resume today, but may be interrupted at some in the week should PM Johnson & EU Commission Pres von der Leyen wish to step in.
• GBP/USD trades -24 pips at $1.2923, with bears targeting Oct 29 low of $1.2881, followed by Oct 14 low of $1.2863. Bulls look to take out Oct 29 high of $1.3026 before taking aim at Oct 27 high of $1.3080.
• EUR/GBP last seen +12 pips at GBP0.9008. A move through Oct 23 high of GBP0.9107 would open up GBP0.9149, the high of Oct 20. Bears look for a dip through Oct 14/29 lows of GBP0.8986 before targeting the 76.4% retracement of the Sep 3 - 11 rally at GBP0.8967.
• UK data highlights this week include final Markit M'fing PMI (today) and final Markit Services PMI (Wednesday). Elsewhere, the BoE will announce its latest monetary policy decision on Thursday, which will be followed by a presser with BoE Gov Bailey.