IFX Market Report: Wednesday 29th December 2021

Cable has been able to hold on above the 1.34 handle on Wednesday after having reached five-week highs of 1.3461 on Tuesday. However, any further upside for Sterling will likely be capped due to renewed Brexit concerns and record high UK COVID-19 cases. England and Wales recorded almost 130,000 new COVID-19 infections yesterday, while Scotland provisionally recorded 9,360 new cases. Britain is already among the worst hit countries in Europe with a virus death toll approaching 150,000. Following the recent rise in COVID-19 cases, the devolved governments in Scotland, Wales and Northern Ireland have each introduced renewed restrictions on hospitality and large social gatherings. But Prime Minister Boris Johnson, who is responsible for health policy in England only, has decided against implementing tougher restrictions until at least 2022. The lack of measures in England goes against the advice of the government's own scientific advisers, with some experts warning it could lead to NHS being overwhelmed early in 2022.

As for Brexit, European Commission Vice President Maroš Šefčovič has claimed continuous threats by Britain to exit post-Brexit trade rules for Northern Ireland are "enormously disruptive”, warning that the entire UK-EU deal could collapse if such rules were cancelled. This has naturally brought a certain level of uncertainty amongst investors and has impaired the Pounds performance.

GBPUSD started the session on Tuesday at 1.3438 and closed just below at 1.3433.

GBPEUR started and finished yesterday at 1.1868. The pair however was able to reach above the 1.19 mark in the session, but unable to sustain itself at that level.

Despite having fallen below 1.13 this morning, EURUSD started Tuesday at 1.1322 and closed not far off at 1.1318.

Looking ahead to today, with almost no notable data being released, markets will likely trade in a tight range.

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