IFX Market Report: Tuesday 29th December 2020

As we head into the new year, the Pound has taken a sharp fall this morning despite the government agreeing a Brexit deal on the 24th. Although Sterling instantly spiked as a deal was announced, it was unable to hold on to those gains – a classic case of “buy the rumour, sell the fact”. It is thought that after many years of back-and-forth negotiations, the confirmation of the deal was largely priced in by markets, hence the lack of significant reaction.

On Christmas eve, GBPUSD opened safely in the 1.35 territory, trading at 1.3576. Despite little volatility, the pair gradually depreciated over the course of the session, finally ending the day at 1.3548.

It was a similar story for GBPEUR – with minor volatility in the markets, the pair opened at 1.1123 and closed at 1.1120.

As for EURUSD, the pair maintained its recent form and spent the day fluttering between 1.2210 and 1.2180. The pair opened that day at 1.2205 and closed at 1.2182.

Across the pond, the US House of Representatives pushed forward with an enhanced COVID-19 relief package yesterday. The Democratic-led House voted in favour of increasing the aid sent to individuals under the new coronavirus stimulus package from $600 to $2,000. On boosting the stimulus cheques, House Speak Nancy Pelosi said that Republicans have a clear choice: “vote for this legislation, or vote to deny the American people the bigger paycheques that they need. ”Despite Pelosi’s reasonable argument, Republicans such as Kevin Brady are concerned about the financial burden of increased payments. The senior politician worries “that this whopping $463bn won't do what's needed - stimulate the economy, or get the jobless back to work.”

On the economic data front, there will be no notable releases this week. Next week on Monday, we have PMI data to start the year.

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