Despite no substantial evidence that trade negotiations between the UK and EU will soon come to a conclusion, the Pound’s performance yesterday would suggest that sentiment is growing more positive. Bloomberg reported yesterday morning that negotiators were “zeroing in” on a deal as soon as next week. Although this is nothing new (David Frost made a similar statement at the weekend) the Pound rallied in the morning and manged to gain some ground against both the U.S. Dollar and Euro.
GBPUSD opened yesterday just above the 1.32 handle at 1.3212. As Bloomberg reported that a post-Brexit may be secured as early as next week, the pound spiked in the morning session at was able to go beyond the 1.3270 mark. As the day progressed the pair was unable to sustain itself at that level and finally closed the session at 1.3247.
GBPEUR was also able to gain some upside in yesterdays session. The pair opened at 1.1137 and was able to finish above that mark at the close, ending the day at 1.1169.
As for EURUSD, we saw a convincing rise this morning from the pair as it tried to test the 1.19 barrier. Yesterday was a rather uneventful day for the pair; opening at 1.1863, it closed just below that mark at 1.1860.
In spite of the recent scientific breakthroughs in regard to a COVID-19 cure, ECB President Christine Lagarde noted in her speech yesterday that even "before the vaccine news, we had pretty negative news on the second wave". We now know that the ECB already incorporated immunization from the virus in 2021 as part of its outlook and remains worried about the current spread of coronavirus. With Germany recording its highest number of deaths in seven months and France reporting two million cases, any improvement in economic performance will likely be next year unless there is a sharp turnaround.
Speaking yesterday also, Fed Char Jerome Powell asserted that “with the virus spreading at a very fast rate, the next months will be very challenging”. Despite describing the recent vaccine developments as “certainly good”, Powell noted that these vaccines will not be widely available for months, and in the short-term the U.S. economy is in an extremely difficult position. Powell also reiterated his call for more fiscal support from Congress to bridge the gap for families until a vaccine is broadly deployed. The Fed Chair said that the current rise in infections and hospitalizations is “very much a concern” because it could scare people from engaging in economic activity and slow the economy.