GBP/USD: Volatility Set To Blow Up With Brexit News, Vaccine, Technicals Point Up

GBP/USD has hit new cycle highs amid Brexit optimism, yet trading remained nervous and choppy. The vaccine approval and hopes for US fiscal stimulus were decidedly positive, and all three themes will likely dominate the scene again, with UK growth and US consumer statistics having their time in the sun as well.

This week in GBP/USD: Brexit headlines cause jitters

Brexit: At the time of writing, intense talks continue in London with hopes outweighing concerns, but uncertainty remains high and nerves are wracked. The three main issues – fisheries, governance and a level-playing field – are still unresolved.

During the week, upbeat headlines of an imminent deal contrasted concerns that France may veto any compromise made by Chief EU Negotiator Michel Barnier, a Frenchman. It is useless to document all the back and forth, but traders’ bottom line was an increase in volatility. Deliberations are set to continue through the weekend.

The UK is the first Western country to approve a COVID-19 vaccine – regulators gave the green light to the Pfizer/BioNTech immunization jabs, and they are planned for delivery shortly. The news boosted the pound and weighed on the safe-haven dollar, a win-win for cable bulls, despite authorities’ early telegraphing of this approval. Moderna also filed for usage.

PM pressured: Prime Minister Boris Johnson faced another rebellion from Conservative backbenchers but passed the return to localized restrictions after the nationwide lockdown expired. Sterling seemed to shrug off this sign of political weakness, for now.

The optimism about the upcoming vaccine was somewhat compounded by the ongoing drop in Britain’s coronavirus cases. The US also experienced a drop in cases, yet the data was skewed by the Thanksgiving holiday. America’s hospitals continue hitting record covid admissions.

Covid infections in the US, the EU, and the UK

(Click on image to enlarge)

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