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Sterling Regains Poise


GBP/USD has recouped initial losses (low print was at $1.3162) with the upswing driven by greenback weakness, linked to positive risk sentiment. This has outweighed a modicum of pressure seen early on, stemming from the news the PM Johnson is self-isolating & Friday's downgrade to UK credit rating by DBRS. Cable last deals at $1.3219, 30 pips better off.

  • Late on Friday, DBRS Morningstar announced that the UK's rating has been lowered to AA from AAA, with trend changed to stable from negative. DBRS noted that the disruption caused by Brexit will weigh on the country's economic recovery.
  • Elsewhere, PM Johnson was told to go into self-isolation after having contact with an MP infected with Covid-19, which threw his plans to revamp his prime ministership into disarray. Local media outlets reported that the PM was seeking to launch a "political reset" after the departure of his influential aides Cummings & Cain.
  • Although some expected that the ouster of Cummings & Cain could prompt to UK to change tack in the UK's negotiations with the EU, Chief UK envoy Frost stressed that London will not be changing its position and a no-deal scenario remains on the table. The talks are entering what was dubbed by Irish Foreign Min Coveney the "move week", as the clock is ticking on reaching agreement. UK Environment Sec Eustice said that the UK & EU could "squeeze out extra time" for more negotiations if the two sides are close to a deal.
  • A break above Nov 12 high of $1.3228 would allow bulls to target Nov 11 high & bull trigger at $1.3312. Conversely, a retreat under Nov 12 low of $1.3106 would expose Nov 6 low of $1.3093.
  • Data-wise, focus moves to UK inflation data (Wednesday) and retail sales (Friday). BoE speaker slate features Haskel (today), Bailey & Ramsden (Tuesday) and Haldane (Wednesday).

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