'High-beta' Sterling takes a hit
The Pound has faced a 'what goes up, must come down' scenario today, after initially starting the week positively as a high-beta currency. GBP rose on Monday & Tuesday, after stocks jumped and the USD saw a sell-off in the build up to the US midterm elections. 'High-beta's' perform well when market risk sentiment is optimistic. That notion stopped today after a Republican 'red wave' looks unlikely to materialise.
The only reason for Sterling strength at the beginning of the week, was due to an outside chance that the Republicans could take control of congress. This would have been deflationary for the US with a tighter fiscal policy stance. It would mean less aggressive interest rate hikes near-term, which then lowers the strength of a currency.
The main FX news this week comes tomorrow and Friday. The US inflation number is key in the current market conditions, as is the UK's GDP reading. There is a real risk that both results hurt the Pound and it's certainly a state of play that suggests £ sellers have more to lose, than to gain for the remainder of the week.