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The EU and the UK leveled up the pound with Level-Playing Field progress – and now it is down to fish to seal a Brexit deal. Apart from the incessant noise of headlines from the talks, investors may have time to take stock of a turbulent end to 2020 in the short holiday week.

Key quotes

“The EU and the UK may reach an agreement by the European Parliament’s Sunday deadline – or afterward. December 31 is the only genuine cutoff date – and even it could be pushed back with creativity. At this point, it would probably take a French compromise on fish to sign of on an accord – but for markets, it will not matter. Any deal is a good deal.”

“GBP/USD could move higher on the appearance of white smoke in Brussels, and move higher before correcting lower. The downside risk is greater. If talks break down, there is substantial room to the downside as a deal is mostly priced in.”

“PM Johnson is under opposing pressures ahead of Christmas – to tighten the screws as the medical experts demand and potentially weigh on the pound, or continue with current plans. Similar to several other countries, Britain allows exceptions around the festive days. In the greater scheme of things, most of the country is under strict Tier 3 restrictions and that is unlikely to change for several weeks.”

“Talks between Republicans and Democrats are set to continue over the weekend and potentially conclude before markets open. Failure to reach a quick accord would likely weigh on markets, but both sides seem keen on sealing a deal before Christmas. Any boost before the new administration settles in would be market positive/dollar negative, but mostly priced in.”

“The US is set to begin administering Moderna’s vaccine, allowing for faster distribution of immunization. Rising vaccination statistics will likely boost sentiment. […] Virus figures are unlikely to improve until sometime in January, and reports about full Intensive Care Units and lockdowns could hurt sentiment.”