GBP/USD has hit new cycle highs amid Brexit optimism, yet trading remained nervous and choppy. The vaccine approval and hopes for US fiscal stimulus were decidedly positive, and all three themes will likely dominate the scene again, Yohay Elam, an Analyst at FXStreet, reports.
Key quotes
“If the EU and the UK announce an accord, the pound has room to surge. While markets lean toward optimism, an agreement is not fully priced in. Conversely, if talks collapse, there is room for a substantial fall and ongoing contact about an interim deal. A temporary arrangement would keep uncertainty and volatility elevated.”
“The first inoculations of the covid vaccines are due on Tuesday 8. The media will be following the distribution of the doses, which require shallow temperatures. Any hiccups in the initial delivery could weigh on the pound and boost the greenback. In the days following the first inoculations, any reports about side effects could have the same downside effect. Conversely, if everything goes smoothly, GBP/USD has room to rise.”
“With the presidential elections settled, politicians seem more willing to compromise a stimulus bill, but that does not promise a deal. It is essential to remember that Georgia’s special elections in early January will determine the Senate’s fate. Moreover, Trump may want to inject some measures before signing any bill, potentially causing a delay.”
“The Food and Drugs Administration (FDA) is set to authorize Pfizer’s vaccine on Friday. The US regulator is more rigorous than the UK one, and its seal of approval could boost markets and weigh on the safe-haven dollar.”
“The US calendar is busier, with inflation standing out ahead of the Federal Reserve’s decision later in the month. While the central bank changed its policy to prioritize full employment at the expense of higher inflation, a significant increase in prices could push any additional buying forward. The Core Consumer Price Index is expected to rise from 1.6% to 1.8% yearly in November.”
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