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Sterling recovers as Brexit talks continue

GBP - British pound

UK and EU leaders are to meet face-to-face today to try and seal a Brexit trade deal. Prime Minister Boris Johnson will travel to Brussels to meet European Commission President Ursula von der Leyen in what is being called a last roll of the dice to secure a trade deal. As negotiations have not progressed since Friday, the deadline for the dispute on fishing right, governance rules and future resolution to be resolved is as early as tomorrow, ahead of the EU summit Thursday and Friday.

The Pound tumbled yesterday, showing the concern amongst investors that a deal will be struck. Failure to secure an agreement would clog boarders, upset financial markets and disrupt delicate supply chains across Europe. This is also not considering the global recovery from the COVID-19 pandemic, that will also be impacting the UK and Europe after these negotiations. GBPUSD saw a session low of 1.3230 yesterday and GBPEUR fell to 1.0940. However, with neither party walking away from the table and talks resuming again today, Sterling has picked itself up from these lows.

Macroeconomic data remains thin on the ground again today, so eyes will remain firmly on Brexit updates for Sterling volatility.

Key Movers

Investors watch eagerly to see whether US policymakers can reinvigorate efforts to pass additional pandemic stimulus. The US congress is expected to vote this week on a one-week stopgap funding bill to give negotiators more time to strike a compromise. A failure to pass this bill would only spur a deeper recession.

California, the US most populous state, has seen record case numbers and hospitalisations due to the COVID-19 pandemic. This has seen the state come out and announce new restrictions on travel and business activity. It is believed other states, such as New York, may need to follow suit with growing numbers of their own.

The news has seen volatility in the USD, which had strengthened at the start of yesterday’s session. The USD had pushed the pound back down to 1.3250, the EUR below 1.2100 and the AUD 0.7380 but all pairs have seen a wavy recovery since.

Expected Ranges

GBP/USD: 1.3290 - 1.3420 ▲

GBP/EUR: 1.1010 - 1.1080 ▲

EUR/USD: 1.2080 - 1.2160 ▲

GBP/AUD: 1.7860 - 1.8040 ▲