Unfolding Events Provides Boost for Pound

The sterling pound enjoys being in the spotlight as successive events unfold to its advantage.

The better-than-expected development of Brexit and vaccine provides support to the UK currency. 

Previously, the uncertainty surrounding both the post-separation trade deal and sustained high cases in Europe are the biggest sources of downward pressure on the country’s foreign exchange market.

The GBP rose as much as 0.8% to $1.3381 against the dollar at one point of the trading session. It settled for a 0.2% hike to $1.3312 in the latest charts.

Much of the good performance came from last week’s update from the European Commission. 

According to sources familiar with the matter, EU ambassadors were informed that about 95% of the post-Brexit deal has already been agreed upon.

Recent reports from the media claim that the agreement might come within days. This gives the European Parliament ample time to ratify the deal before the deadline on December 31.

Such an update provided a boost to the currency due to its imperative role in the long-term relationship between the two former allies.

As asserted by the Bank of England’s governor, the trade deal after the transition period is more important than the pressing impact of the pandemic.

Adding to the optimistic mood is the confirmation of the lockdown’s end that will be effective starting December 2.

However, the UK’s double-dip recession for November provided much blow to the economy and capped the possibility for further runs.

With the update, Morgan Stanley raised its forecast for the sterling pound, saying that it could surge as much as $1.36 against the dollar.

However, the currency continues to face downward risk as the country’s yields remain low.

How the Euros Fared Against the US Dollar

Based on the latest movements, investors are currently pricing the sterling based on the positive developments in the market.

While the currency already rallied to impressive gains, foreign exchange strategists noted that it could further go upward should the Brexit deal materialize.

Consequently, the exit of market liquidity after the US holiday later in the week is projected to provide support.

Meanwhile, the euros are not behaving as tamed as its counterpart. Yesterday, the bears gained ground as the price fell below the $1.17 level. 

In today’s session, the medium-term outlook remains bearish for the EUR/USD pair. The key resistance of $1.18 is relatively under much downward pressure.

On long-term projection, we should see an uptrend, but a prospect for a big fall is still possible.