GBP/USD: Fishing For A Brexit Deal Set To Succeed, Allowing For Cheerful Gains

10 and one 10 us dollar bill

 

  • GBP/USD has been extending its gains amid optimism for a Brexit deal.
  • The week including Christmas, may see markets digesting the news and readjusting.
  • Late December’s daily chart continues painting a bullish picture. 
  • The FX Poll is pointing to short-term gains and a drop afterward.

The EU and the UK leveled up the pound with level-playing field progress – and now it is down to fish to seal a Brexit deal. Apart from the incessant noise of headlines from the talks, investors may have time to take stock of a turbulent end to 2020 in the short holiday week.

This week in GBP/USD: Brexit optimism galore

Every Brexit headline has had the power to propel the pound higher or pummel it. Comments from the talks in Brussels and from officials in London have generally moved in a positive direction. UK Prime Minister Boris Johnson allowed for a breakthrough on the thorny level-playing field issues by allowing for a mechanism that ties both sides to any changes in rules.

While the details remain unclear – negotiators are relatively quiet, which is a good sign – the advances have pushed the pound higher. Both sides also seem to agree on governance, leaving only on open topic – fish.

The minuscule fisheries sector is a visible one and a politically charged one with an outsized role in the 2016 EU Referendum in the UK. For France and several other countries, having access to British waters is also a critical issue. Both sides have clashed over the topic, eroding cable’s gains and leaving allowing for a correction ahead of the weekend.

There have been additional twists and turns in the saga with large movements. Zooming out allows seeing the growing chances of an accord reflected in the price.

US Stimulus

 Similar to Brexit, Democrats and Republicans have moved forward toward agreeing on a relief package worth $900 billion. Contrary to deliberations in Brussels, America’s politicians decided to set aside thorny issues – aid to states and liability waivers.

A breakthrough became possible once Senate Majority Leader Mitch McConnell leaned into the talks following his acknowledgement of Joe Biden as the winner of the election. After the Electoral College ratified Biden’s victory, the focus fully shifts to Georgia’s special elections. Another dissimilarity with EU-UK talks is that while some differences remain, the optimistic rhetoric prevails on both sides of the isle.

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