The British pound continues to register gains. Currently, the pair is trading at 1.3602, up 0.74% on the day.
Pound closes in on 2½ year high
The week of Christmas is always marked by thin liquidity, which means that the markets are vulnerable to volatility. This has been the case with the British pound which continues to show significant movement even though there are no tier-1 releases this week out of the UK.
Sterling started the week with losses, but has since recovered and then some. GBP/USD crossed above the symbolic 1.36 level earlier on Wednesday and is close to the December high of 1.3624, the pair’s highest level since May 2018. The Biden administration is expected to inject further stimulus into the US economy and the Federal Reserve has no plans to alter its accommodative monetary policy. This could well translate into the pound continuing to appreciate in early 2021.
Brexit is signed but not over
The “long and winding road” of the Brexit talks are mercifully over, as the sides hammered out an agreement last week, just ahead of the December 31st deadline. Still, there are concerns that there could be major hiccups in the new trading relationship, which could be felt as early as next week. These fears have intensified after chaotic scenes of thousands of trucks stuck in the port of Dover last week when France closed the border after a mutation of Covid-19 appeared in the UK. The new regulations which come into force on January 1st could result in a slowdown to the flow of traffic between the UK and the continent, which could trigger volatility from the pound.
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GBP/USD Technical
- GBP/USD faces resistance at 1.3735. The next resistance line is at 1.3818
- 1.3536 has switched to a support role. Below, there is support at 1.3459
- The pair has crossed above the 10-day MA line, which is a sign of an upturn for the pair