GBP/USD continues to post gains this week. In Tuesday’s North American session, the pair is trading at 1.3078, up 0.28% on the day. In the U.S, voter participation is expected to be heavy in the midterm congressional elections. As well, the U.S. releases JOLTS Jobs Openings. There are no major British releases on the schedule.
The pound climbed 1.1% last week, and the rally has continued, with gains of 0.75% so far this week. The pound remains attractive to investors, following reports that the U.K and the European Union have made substantial progress towards an agreement over Brexit. One of the most vexing issues facing the sides is the Irish border. The EU wants Northern Ireland to remain in a customs union with Ireland, but the U.K is unlikely to agree to any kind of border between the north and the rest of the UK. On Friday, David Lidington, a close adviser of Prime Minister May, said that the two sides were “very close to resolving” the dispute over the Irish border, one of the most vexing problems in the Brexit negotiations. May would like the EU to host a special Brexit summit this month, with an eye to signing a deal before the end of the year. However, the Europeans have not showed the same enthusiasm emanating from London, and they will likely want to see more concessions from May before agreeing to a Brexit summit.
All eyes are on the U.S mid-term elections, with voters deciding who will control Congress. Many analysts are calling the election a referendum on the presidency of Donald Trump, who has presided over a red-hot economy but has also alienated many voters with his controversial policies on health care and immigration. There are a host of races that are too close to call, but most analysts expect the Democrats to narrowly win the House while the Republicans will hold onto their majority in the Senate. If this scenario materializes, the result would be ‘political gridlock’, which could hamper Trump’s fiscal policy plans, which in turn could result in the Federal Reserve easing on its rate hike plans. Traders should expect some volatility in the currency markets once the results are announced.
