Daily Currency Update

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Vaccine news and Brexit continue to dominate proceedings with the pound

GBP - British Pound

Newspaper headlines this morning focus on the euphoria around the approved Pfeizer Coronavirus vaccine that is due to be rolled out in the UK next week. Articles are accompanied by pictures of lorries reported to be stacked with the 800,000 jabs that Matt Hancock, UK Health Secretary, claims will be administered to the most vulnerable next week. In an interview with the BBC, Hancock stated that "The UK is the first place in the world to have a clinically approved vaccine ready to go" and that “the goal will be to vaccinate through the NHS right across the UK as rapidly as the company can manufacture."

Reports in November stated that we would have a total of 10 million vaccines available in December, and it looks like there will be three phases of administration. This first batch will cover all those vulnerable and in care homes, as well as the majority of the UK population above 80 years old. Phase 2 consists of 40 million further doses, to cover anyone in the UK population above the age of 60. The market took this news as very positive of course, with sterling remaining on the front foot, particularly against the US Dollar, where it broke key psychological milestones above 1.34.

In a Brexit update, Michel Bernier and David Frost continue to be in discussion in London around the final parts of a deal. We are witnessing a bit of a ‘negotiation tunnel’ at the moment, with not much news being released, suggesting that we could be at the very final stages before a deal is announced. However, to pour cold water on the pound, Michel Bernier did state on Monday in front of EU ministers, that the union was willing to walk away from the negotiations if the parties could not agree to favourable terms. The news pushed GBPUSD temporarily lower towards the 1.3350 handle, but the resilient pound has already regained ground breaking above 1.34 in the early hours of this morning and making a push for yesterday’s highs of 1.3450.

Key Movers

The stock markets were relatively subdued yesterday which could just be the quiet before the ensuing Brexit and pandemic led storm. There has been a general euphoria around of late, with vaccine news and positivity that 2021 may see massive recoveries in global economies. The FX markets carried on toing and froing, with a sustained drive higher by the Euro above 1.21 against the US Dollar.

The Euro remains a benefactor of global risk appetite, but also news that there could be final approval of the EU pandemic bonds package in the coming days, which will pump much needed economic stimulus across the bloc.

In the US, lawmakers in Washington continue negotiating a fiscal stimulus deal to support the US economy. Optimism about a $908 billion package is also boosting risk sentiment pushing the dollar lower.

Christmas is a volatile period for the currency markets at the best of times, with reduced liquidity in the market, the chances of bigger spikes are heightened. With this year’s pandemic and Brexit saga thrown into the mix, we can expect some more significant moves to come before the year is out.

Expected Ranges

GBP/EUR: 1.1020 - 1.1085 ▲

GBP/USD: 1.3380 - 1.3450 ▲

EUR/USD: 1.2090 - 1.2145 ▲

GBP/AUD: 1.7880 - 1.8200 ▼

GBP/NZD: 1.8760 - 1.9185 ▼