Sterling Jumps on Post-Brexit Deal Outline Agreement

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Sterling Jumps on Post-Brexit Deal Outline Agreement

The U.S. dollar is in tight ranges this morning, except for a dive versus the British pound. 

Overview

The general risk-on mood has not soured the greenback ahead of the long holiday weekend.  A seemingly imminent deal over Brexit has canceled out the confusion over the U.S. stimulus deal.  The general thinking is that the pandemic relief bill will eventually get done despite the objections of President Trump.

There is no major economic data left on this week’s docket so the greenback could possibly coast into the weekend without much movement.  However, we cannot discount choppy price action as liquidity thins and some headline risk surrounding Brexit.

What to Watch Today…

  • No major events scheduled for today

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EUR  

The Canadian dollar is modestly stronger today even as the price of crude oil ticked lower.  The loonie’s two-day gains may be fragile after Statistics Canada reported that building permits fell 12.6% month over month in October.  As with the other pairs, we don’t expect USD/CAD to experience much movement during today’s session.

GBP  

The British pound was the best performing G10 currency overnight, gaining as much as 0.9% before paring some of its gains.  The pound jumped late yesterday after the European Union and the United Kingdom agreed to the outline terms of the deal, including the sticky issue of fishing rights.  However, at this moment it appears that there has been a slight snag on the fishing front.

Apparently, some of the baseline fish figures that the EU shared with member states don’t tally with those negotiated in the room with the U.K., so the effort now is to ensure the two sets of numbers match and everyone is talking about the same thing.  The nitty-gritty part of the negotiations is a signal that the two sides are close.

GBP/USD has gained nearly 2% over the past two days which would represent its largest two-day gain since March.   If the deal is indeed done, currency analysts will have to figure out if a done deal is baked into the sterling’s recent gains or if the sterling has more to gain.  The sterling is up 9% from mid-summer.

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