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Pound Spooked on No Deal Rhetoric

Pound Spooked on No Deal Rhetoric

GBP

Sterling is currently clutching to the 1.34 mark today thanks to broad based Dollar weakness as markets continue to trade with caution on doubts that Britain and the European Union can strike a Brexit deal before the country’s transition out of the bloc in 4-weeks time.

Reports that negotiators are still no closer to agreeing on differences over fisheries, state aid for companies and rules to resolve disputes, offsetting any optimism from the UK becoming the world’s first country to approve the Pfizer-BioNTech Covid vaccine. EU member states have also made a point in telling Brexit Chief Negotiator Barnier, not to rush into an unsatisfactory agreement given talks are at ‘a make or break’ moment. 

Against the Dollar, the Pound currently trades just over the 1.34 mark whilst against the Euro, Sterling finds itself around the 1.1055 as markets continue to monitor sentiment trends and impending announcements regarding a Brexit agreement. 

 

USD

The dollar continues to lack friends in early European trade Thursday, with optimism over the rollout of vaccines and talk of new U.S. fiscal stimulus prompting risk-on trades.

At (07:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 90.925, trading around levels last seen well over two years ago.

Optimism over U.S. stimulus talks and bets on a successful roll-out of vaccines are leading traders to take bets on global growth and thus riskier currencies at the expense of the safe haven dollar, the world’s reserve currency, particularly with the Federal Reserve committed to keeping rates low for years.

Elsewhere, GBP/USD gained 0.2% to $1.3385, remained close to a three-month high.

 

EUR

The Euro is setting a new 32-month high above 1.21 as pressure continues to mount on the safe-haven Dollar amid hopes for US fiscal stimulus and an upcoming vaccine with investors even shrugging off Germany’s extended restrictions.

The single currency got an additional boost from better than expected German Retail Sales figures and seemed unaffected by expectations of an enhanced quantitative easing program from the ECB at their policy meeting next week. Nevertheless, the pair ended near the top end of its daily trading range and edged higher for the third consecutive session on Thursday. The pick up marked the fourth out of five positive day and pushed to fresh 32-month highs during the Asian session. Markets will now look forward to the final version of the Eurozone PMI prints and the US economic releases for further impetus.

As of writing, the Euro trades around the 1.2125 mark against its US counterpart. 

 

Data to watch

14:30 – USD – Unemployment Claims

16:00 – USD – ISM Services PMI 

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