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GBP higher amid speculation Brexit talks have entered the 'Tunnel'

GBP - British pound

GBP jumped higher against most of its major peers through yesterday and overnight trading amid speculation that the UK and EU Brexit talks have entered the mythical ‘tunnel’ - a series of intensive talks among a small core of negotiators carried out in total secrecy with the aim of hammering out a deal away from the prying eyes and loud objections of onlookers.

A report by Tom Newton Dunn of the Times Radio also stated that EU Chief Negotiator Michel Barnier has stopped internal debriefs to the wider EU and there are hopes, on both sides, of a deal by the end of this week.

This news combined with broad USD dollar weakness saw GBP/USD hit an intra-day high of 1.3440, its highest level since 1st Sept 20.

GBP/EUR on the other hand fell below the 1.11 handle as strong Eurozone data helped the single currency become the best performer of the day.

Looking ahead to today, Brexit and Covid Vaccine news will continue to dominate market moves, however, the release of European Unemployment rates for October plus US ADP employment numbers could fuel further volatility.

Key Movers

The USD fell sharply through Tuesday trading as a combination of concerns over a spike in coronavirus cases after Thanksgiving and Federal Reserve Chairman Powell’s promise to keep interest rates low until there are actual signs of inflation gave investors very little reason to buy dollars

In stark contrast, the Euro enjoyed strong gains against most of its major counterparts as positive Brexit rumours and better than expected European economic data buoyed the single currency.

Germany reported a surprise drop in unemployment rolls that helped ease the unemployment rate while Manufacturing PMI was revised higher. This morning also saw Retail sales come in higher than predicted for Oct at 8.2% versus 5.9% (expected)

As a result, EUR/USD has surged through the 1.20 level, advancing 1% to 1.2075, a two-and-a-half-year peak.

Attention now turns to news of any further Covid vaccine approvals from regulators, plus European unemployment rates, due later this morning and US ADP employment numbers this afternoon.

Expected Ranges

GBP/USD: 1.3325 - 1.3475 ▲

GBP/EUR: 1.1035 - 1.1150 ▼

GBP/AUD: 1.8050 - 1.82 ▲

GBP/NZD: 1.88 - 1.90 ▲

GBP/CAD: 1.72 - 1.7350 ▲