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Global Markets Buoyant on Hope of Vaccine

GBP - British Pound

The British Pound staged a strong relief rally against the Euro, U.S. Dollar and other major currencies on Monday reversing some of last week’s sell-off. GBP/EUR rallied by 0.75% to push above the 1.10 handle. GBP/USD pushed higher by 0.5% to break through 1.26 and then trade towards 1.27. There were no obvious signs as to why Sterling rallied yesterday, more than likely it was repositioning in the markets before another round of Brexit negotiations this week.

Gains came against all major G10's leaving Sterling the best performing major currency of the day. However, looking ahead at 2020 as a whole and it is obvious that the pound remains under significant selling pressure. The UK's economic recovery from the COVID-19 crisis appears to be somewhat lagging behind that of other countries, which will only compound the weakness for an already under-pressure Sterling.

With no data to report until Friday, with PMIs and retail sales reports, Sterling will continue to be driven by headlines surrounding Brexit negotiations or any COVID-19 updates.

Key Movers

The EU Summit and their decision on a European coronavirus stimulus package is still the main driver for the euro. Talks between European leaders continued for a fourth day and there are reports they are getting very close to a deal. Commission President Ursula von der Leyen said they are entering a crucial phase in the talks and things are moving in the right direction. On the contrary, there’s still some resistance from the frugal four who feel that it changes the complete fabric of the EU. They favour further repayable loans rather than grants with terms and restrictions. So far, an agreement has not been reached but if it is achieved, it is widely expected EUR/USD will hit the 1.15 handle. In contrast, if the talks break down, the euro which has been rallying for nearly the entire month will sell off in disappointment.

Markets were generally buoyant to start the week as investors were invigorated by the positive response from the vaccine developed by Oxford University and AstraZeneca. In their initial stage human trial with more than 1,000 participants, it was discovered that the vaccine produced antibodies and killer T-cells that can last at least 2 months with no serious side effects.

Expected Ranges

GBP/USD: 1.2645 - 1.2795 ▲

GBP/EUR: 1.1040 - 1.1150 ▲

GBP/AUD: 1.7980 - 1.8080 ▲

EUR/USD: 1.14 - 1.1525 ▲