GBP/USD held within its recent 1.27-1.32 range despite high COVID-19 case counts and greater restrictions. Progress in EU/UK trade talks could now flip its range to 1.32-1.37, economists at Westpac apprise.
Key quotes
“Data over the next week is dominated by surveys (notably PMI and CBI surveys). Confidence is a key component and will be critically related to both the containment of COVID-19 cases and the risk of failure in EU/UK trade talks.”
“As COVID-19 cases have increased (rising to over 26k in the 24 hours into Wednesday) the UK government has been forced to impose tighter restrictions in North West, North East and Central England as well as N. Ireland, Central Scotland and Wales. Failure to curb the infection rate could force the whole of UK into another economically damaging lockdown, though this is being vehemently resisted by authorities.”
“EU/UK post-Brexit talks appeared to be close to being abandoned at the end of last week. However, potential easing of contentious parts of UK’s Internal Market Bill and possible solutions for EU fishing rights in UK waters could allow intense legal discussions as early as next week. It that transpires, GBP/USD could flip its recent range through 1.3200 (for a 1.32-1.37 range), despite the current rise in COVID-19.”
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