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Crucial time for the pound (Daily analysis 8.12.2020)

8 Dec 2020 8:16|Conotoxia.com

Brexit negotiations and the lack of progress on key issues pushed the pound sterling sharply lower. The US dollar hovers above 2.5-year lows and Wall Street trades within a stone's throw from all-time highs. Gold rallies and swiftly returns above 1850 USD/oz.

The EUR/USD pair's depreciation was quickly erased to a tad below the 1.21 area. The USD/JPY exchange rate advanced above the 104.00 mark. The Antipodean currencies trade softer. Markets await a final verdict on the US fiscal package (the deadline was moved to December 18th), approval of Pfizer BioNTech vaccine and hope for ending political impasse on Brexit and the EU budget. The shape of ECB's easing remains a puzzle as well. Consequently, the wait-and-see approach should prevail and the US dollar's decline might take a breather.

All in politicians' hands

As chances for a no-deal and chaotic United Kingdom's departure from the common European markets rose, the pound sterling suffered on Monday. The GBP/USD pair dropped below 1.3250, and the EUR/GBP pair jumped rapidly to the 0.9140 area. The fact that the talks will continue helped to recover the losses partially. Nonetheless, the pound sterling is set to remain volatile and jittery.

Markets are still waiting for a decisive breakthrough on the UK - EU trade deal. UK sources warned that talks might collapse any minute now. What is more, UK's officials stated that no trade negotiations would be carried out next year. Overnight, the European Commission President Ursula von der Leyen spoke with UK PM Boris Johnson to unblock the deadlock in negotiations. Over Twitter, von der Leyen stated that the conditions for an agreement are not there due to remaining differences on critical issues.

Crucial areas of contention have all been well known for months. The list includes fisheries, governance of a potential deal and rules for fair competition. As negotiators failed to secure a deal, talks are now in the hands of politicians. Johnson and von der Leyen will attempt to meet personally in Brussels to solve outstanding issues.

Conotoxia research team

8 Dec 2020 8:16|Conotoxia.com

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

7 Dec 2020 9:20

The pound tumbles as the time for a deal is running out (Daily analysis 7.12.2020)

4 Dec 2020 13:07

The greenback rides on a downward spiral (Daily analysis 4.12.2020)

3 Dec 2020 8:56

An extension of euro's rally (Daily analysis 3.12.2020)

2 Dec 2020 8:37

The US dollar bounces off from long term lows (Daily analysis 2.12.2020)

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