- GBP/USD pops on US dollar weakness and takes o the bear’s commitments in the 1.36 area.
- New lockdown deflates optimism from a post-Brexit trade deal with the European Union.
GBP/USD is currently trading at 1.3625 and higher by 0.45% at the time of writing. The pair travelled from a low of 1.3553 to a New York session high of 1.3642 as the US dollar melts.
Risk assets are trading on a mixed footing and markets remain cautious ahead of today’s US runoff elections which leave the USD as today’s underperformer, albeit followed by the GBP which has suffered a blow at the start of the week.
The British pound remains well below the 2-1/2-year high of $1.37 hit in the previous session as a new lockdown deflates optimism from a post-Brexit trade deal with the European Union.
On Monday, Prime Minister Boris Johnson ordered England into another national lockdown to contain a surge in COVID-19 cases that threatens to overwhelm parts of the health system.
Tumbling 1% from its highest levels since May 2018, the pound suffered the sentiment of the new measures that were eventually confirmed that could cost about 10% of economic output for as long as they last according to some analysts.
“The pound has failed to display much of a relief rally in the wake of the pre-Christmas trade deal between the UK and the EU, with the rise of COVID-19 cases and greater restrictions on the UK economy becoming a concern,” Rabobank strategists said.
There were 60,916 new confirmed coronavirus infections in the UK on Tuesday, the UK government data showed, per Reuters.
This reading followed Monday’s increase of 58,784 and marked the biggest one day jump in cases.
Further details of the daily update showed that there were 830 COVID-19-related fatalities.
Meanwhile, PM Johnson will be holding a press conference at 1700 GMT.
As for the latest positioning data, net GBP positions have held in positive territory for four consecutive weeks but slipped back moderately in the latest data set.
”The pound has failed to display much of a relief rally in the wake of the pre-Christmas trade deal between the UK and the EU with the rise of covid-19 cases and greater restrictions on the UK economy becoming a concern,” analysts at Rabobank explained.
Overall, however, the positive vaccine news and the perception that the Fed will lean on the yield curve if necessary could continue to support risk appetite and ultimately weigh on the USD.
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