Royal Assent Granted On Brexit Deal
The Pound gained traction across the board yesterday, moving back above the 1.3600 mark against a weaker US Dollar. The additional US financial aid approved and hopes for a strong global recovery in 2021 continued to foster an upbeat market mood. Strong risk sentiment got another boost after UK regulators approved the AstraZeneca vaccine, and in turn that continued undermining the safe-haven Dollar and driving the Pound higher.
Sterling even shrugged off the unprecedented levels of COVID infection as several areas of the country went into the tier-4 restrictions and the UK reported over 50,000 news cases for the second day in a row. Also, UK lawmakers approved the post-Brexit trade deal with the European Union and reports indicate that the deal has been granted royal assent by the Queen. Sterling spiked on the news and lept to the mid-1.3600s on the Dollar, 2.5 year highs, overnight.
US policymakers keep jostling over the covid aid paycheck of $2,000 before Tuesday’s Georgia runoff. However, vaccine developments and hopes that the Joe Biden government will be stimulus-friend keep traders cautiously optimistic.
Against this backdrop, S&P 500 Futures rise 0.11% while tracking the Wall Street benchmarks to the north.
The US Dollar index (DXY) bounces off April 2018 low, marked earlier in Asia, while S&P 500 Futures wobble around $3,725/20 and stocks in Asia trade mixed.
Sustained trading below the early-month high near 1.3625/20 can keep directing GBP/USD sellers toward the 1.3600 round-figure, a break of which can retest the 21-day SMA level of 1.3450. Meanwhile, March 2018 low around 1.3710 may lure the Cable buyers during the fresh upside beyond the latest top near 1.3649.
The Euro is wavering around the 1.2295 area against the Dollar on early Thursday as ECB policy maker Jens Weidmann’s comments favoring single currency bulls as we approach the end of 2020.
It will now be interesting to see if the pair is able to capitalize on the move or bulls opt to take some profits off the table amid relatively thin liquidity conditions on the back of the year-end holiday season. That said, the set-up still supports prospects for an extension of the upward trajectory.