- Multiple news reports flagging a possible post-Brexit trade deal which could land just in time for Christmas.
- GBP remains elevated on the prospects and EU sources have said a Brexit deal could be reached in the next 24 hours.
GBP/USD GBP/USD is currently trading at 1.3499 and up around 1.12% at the time of writing, talking higher within a 1.3347 and 1.3570 range.
In recent weeks the pound has been bombarded by both hope and disappointment regarding the prospects for a deal.
There’s been some market price action across asset classes in the last hour or so with multiple news reports flagging a possible post-Brexit trade deal which could land just in time for Christmas.
EU sources have said a Brexit deal could be reached in the next 24 hours and the pound is battling background.
“There’s a very strong push to get it done before Christmas”, an EU diplomat said.
“The idea that everyone comes back again on Sunday or Monday to start again … that will happen if necessary but there does seem to be a strong push to get it done before Christmas.”
That being said, while GBP is likely to find support on any news that a trade deal has been struck, it remains likely that any relief rally will be cut short, analysts at Rabobank argued.
”Firstly, any deal is set to leave many sectors, particular in services, out in the cold. In addition, the likelihood that larger swathes of the UK will be entering higher ‘tier 4’ restriction to prevent the transmission of the virus will significantly dampen recovery prospects.”
Lee Hardman, currency analyst at MUFG Bank also commented that the “market is anticipating that a deal will be agreed in the next day or two.”
In other news, there was an upward revision to UK Q3 GDP data was reported. The economy bounced back by a stellar 16.0% QoQ, revised from a previous estimate of 15.5%.
However, the National Statistics reported that the UK economy is still 8.6% below where it was at the end of last year.
As for the coronavirus setback, whereby London and much of the S.E of England has been forced into tough ‘tier 4’ restrictions from the early hours of Sunday morning, there are little signs of any let-up.
In the week to Sunday, the number of new coronavirus cases reported in the UK had increased by a startling 51% w/w which suggests a mutation of the virus into a more contagious form or the perhaps the presence of super-spreaders in the UK.
”Latest developments drives home the reality that economic news will worsen before it improves and that the country is facing a tough start to the New Year,” analysts at Rabobank explained.
”Rising covid-19 cases, government wrangling, a widening of tier 4 restrictions in England, increased pressure on the public purse and, in all likelihood a continuation of negotiations with the EU on areas such as financial services and security suggest the GBP may be unable to shrug off its vulnerability or volatility in 2021.”
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