GBP / USD cuts weekly losses and consolidates around 1.2950

• GBP / USD bounces higher from 1.2880 and consolidates around 1.2950.
• The pound weakened against a stronger dollar amid COVID-19 fears.
• The BoE, Brexit and US elections will be the main drivers next week.

The pound sterling It returned above 1.2900 on Friday after rebounding from 10-day lows at 1.2880, to consolidate around 1.2950. The pair has settled in the middle of the trading range of recent weeks, ahead of an eventful week.

BoE, coronavirus and US elections in focus next week

The pound lost ground this week, weighed down by lousy appetite for risk with the second wave of COVID-19 sweeping through Europe and the market gearing up for a disputed US election next week. In this context, investors have stayed away from risk, which has been reflected in a strong recovery in the USD.

With Germany and France introducing regional closures and lockdowns in Spain, pressure on the UK government is mounting to implement stricter restrictions. A second lockdown could trigger strong selling pressure on the GBP.

However, the event of the week will be the Bank of England’s monetary policy meeting, scheduled for next Thursday. Some analysts have anticipated an increase in the quantitative easing program, which would have a negative impact on the pound, although the biggest impact would be the introduction of negative interest rates. This possibility, although unlikely, could bring the pound down.

Beyond that, the outcome of the US elections will undoubtedly trigger relevant price movements. The most likely outcome, Biden’s victory, is expected to put negative pressure on the US dollar, anticipating the passage of a large stimulus package to support the economic recovery. However, a contested election without a clear winner could boost safe haven demand and push the US dollar higher.

Credits: Forex Street