IFX Market Report: Thursday 31st December 2020

The Pound is up against both the U.S. Dollar and Euro as parliament overwhelming backed the post-Brexit trade deal last night. The EU (Future Relationship) Bill was backed in the House of Commons by 521 to 73 votes last night. The House of Lords later passed it at third reading which was the final stage of the process. After being signed into law, the agreement will come into effect at 23:00 GMT Thursday. Despite Brexit happening on 31st January, the UK since then has continued to follow the EU’s trade rules until now. In a statement last night, Boris Johnson thanked MPs for voting for the bill and claimed “the destiny of this great country now resides firmly in our hands”. Keir Starmer convinced most of his Labour MPs to vote in favour of the bill (which they did) after asserting that “a thin deal was better than no deal.”

After a tough start to the week GBPUSD is back on the rise following positive news on Brexit. The pair opened Wednesday at 1.3541 and pressed on throughout the session, able to close just above the 1,36 mark at 1.3601. It is worth noting that since the open the pair has gone from strength to strength and is now trading above the 1.3660 mark.

GBPEUR was also able to gain some upside from the recent Brexit developments. The pair opened at 1.1044 and despite improving on this position, was unable to reach the 1.11 range, closing the day off at 1.1077. This morning however, GBPEUR is now trading above 1.1120.

After its strong advance toward the 1.23 region, EURUSD is keeping up the pressure. The pair opened at 1.2260 on Wednesday and closed at 1.2279.

It is important to mention that one of the main factors to EURUSD and GBPUSD gaining momentum is U.S. Dollar weakness. With the greenback holding safe haven status, and the markets tone becoming ever more ‘risk-on’, Investors are continuing to short the Dollar on the hopes of a strong global economic recovery in 2021 and expectations that the Fed will keep interest rates lower for a longer period.

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