The pound claws back as Johnson gives in (Daily analysis 22.12.2020)

Hopes for an 11th-hour trade deal revive and consequently, the pound recovers from the steepest decline since March. GBP/USD firstly dived below the 1.32 but has pushed back to the 1.34 since then as Boris Johnson is likely to accept a smaller reduction of the value of the fish the EU pulls from UK waters.

A knee-jerk reaction to the spreading of a new COVID-19 variant was muted on Wall Street as Congress passed a fiscal package while European markets and crude oil tumbled. The U.S. dollar downtrend remains intact and EUR/USD has already recovered to trade above 1.22, also thanks to the pound’s recovery.

In opposition, the Australian dollar and the New Zealand dollar continue to grind lower and underperform. In the emerging markets space, the Russian ruble is hit the hardest and has already declined by 2% since the start of the week also due to the possibility of US sanctions in response to alleged Russian cyberattack.

Conotoxia research team