The EURUSD pair closed lower on Tuesday, October 13, with the single currency sliding 0.57% against the US dollar to 1.1743. Several factors played into greenback strength: Brexit negotiations remained deadlocked, two pharmaceutical companies paused coronavirus vaccine trails, while the UK appeared to be heading back into lockdown mode.
Brexit negotiations are complex and time is running out. German Chancellor Angela Merkel said at a meeting of the European Union’s Committee of the Regions that the EU is interested in striking a trade deal with the UK, but must also be prepared in case an agreement is not reached. Michel Barnier said that London and Brussels are close to a compromise and a partial preliminary deal looks like the most likely scenario.
The GBPUSD pair fell nearly 146 pps to 1.2922. Sterling came under pressure after media reports that two of the government’s scientist advisers called for a short (two-week) statewide lockdown.
Meanwhile, Johnson & Johnson and Eli Lilly have paused late-stage Covid-19 vaccine trials due to an unexplained illness in one of the study participants. This dampened optimism about these two vaccine candidates. In the upshot, stock indices tumbled and the dollar was well bid.
Today’s macro agenda (GMT+3)
EURUSD dropped 85 pps to 1.1731 on Tuesday. The price action has been in a corrective phase for 14 hours even though cable has retraced to its lows against the dollar and the euro. Three crosses (EURGBP, EURJPY and EURCHF) support buyers. Sterling is predictably on the back foot since October 15 is the deadline for Brexit and there is still no sign of a trade agreement. The Brexit saga has been dragging on for years, and it’s no secret that officials can manipulate the markets by making controversial statements about the negotiations.
A number of speeches are on today’s agenda. Christine Lagarde will speak at 8 am GMT. She has had called a number of press conferences over the past week, so today’s event should not exert a major impact on the euro. Sellers passed the trend line at 1.1772. If support weakens from the cross currency pairs, then a decline to 1.1700 cannot be avoided. Right now, there is enough negativity to keep buyers in check until updates roll in on coronavirus vaccines and Brexit developments.