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Is GBP upside imminent?

Daily Currency Update

GBP - British PoundThe pound is on the front foot yet again, as the pessimism from the past few months looks to slightly fade. Analysts are confident that the UK will pass through a trade deal, which yet, has not been priced into the market. If the UK do manage a deal within the allotted time zone, we could see GBP upside of 4-6% against its major peers. Last week we heard Michel Barnier confident that a Brexit deal would be agreed, which makes a change from his normal pessimistic stance. In the shorter term, the Bank of England meet this week remains the key currency driver. At present, it is assumed Bailey will announce no changes to the current stimulus package, however this leaves sterling open to a real surge, should the BoE vote to cut rates or boost QE.

Key Movers

U.S. bankers expressed their reservations for the current Fed stimulus package on Monday, as they claim that further stimulus must be added to combat the ever-growing pandemic in the US. Due to significant and unnecessary micromanagement of the economy for the past few quarters, the Fed are left with very limited stimulus options, now that they desperately need them. The US are weeks behind the UK, Eurozone and China on their infection curve and will likely face another two or three weeks’ worth of COVID-19, without reaching first phase ‘peak’. Congress have already discussed the possibility of a new package to replace the unemployment benefits that expired on Friday. Across the pond in Europe, ECB chief economist, Phillip Lane, has pledged to provide the economic support needed for the Eurozone to bounce back. The PEPP envelope still sits strong, and the EU has seen a bounce back in economic activity already.

Expected Ranges

  • GBP/USD: 1.2975 - 1.3140 ▲
  • GBP/EUR: 1.1015 - 1.1210 ▲
  • GBP/CAD: 1.74 - 1.76 ▼
  • GBP/AUD: 1.8195 - 1.8390 ▼