Sterling rises due to rumours of a Brexit agreement; US equity markets keep gains

Dec 24 • Market Commentaries • 355 Views • Comments Off on Sterling rises due to rumours of a Brexit agreement; US equity markets keep gains

GBP pairs rose sharply during the New York trading session after rumours emerged that the UK and EU negotiating teams had finally (after 9 months) reached a compromise in their Brexit discussions.

Analysts and traders are waiting for further detail of the 2,000-page agreement-document before confirming there’s a final deal to be signed preventing the UK from crashing out of the EU on January 1 and trading under WTO terms.

The worded document is only the first stage; the agreement needs to pass through the various European Union committees and councils before approval. Trust became shattered recently after the UK government pushed through their Internal Market Bill, which broke International law. Therefore, many MEPs in the EU parliament will remain sceptical that once the ink is dry, the UK government will begin to renege on the deal.

GBP/USD rose by 0.77%, printing a daily high above the 1.3500 level-handle and breaching R2 before retracing back to R1 deeper into the session. EUR/GBP slipped below the 90.00 critical round number during the NY session, and at 7:30 pm UK time, the cross-currency pair traded down –0.73% but still up 6.33% year-to-date. The cross-pair threatened to breach S3 at some stage during proceedings, before rising back up to S2.

EUR/USD traded in a tight range throughout the day’s trading sessions, close to the daily pivot point and flat. The most traded pair is still up 8.98% year-to-date. The euro fell sharply versus both antipodean currencies; NZD and AUD and was flat on the day versus its other main peers.

Despite Covid 19 accelerating throughout European countries, overall sentiment in the DAX, CAC and FTSE indices were bullish as the Brexit situation looks close to a resolution. The news that other pharma firms are close to releasing vaccines has also helped to lift market spirits.

The NASDAQ 100 printed another record high during the New York session before surrendering the gains late in the session. The index traded close to S1 and down -0.22% on the day. The SPX 500 closed 0.28% while the dollar index (DXY) slipped by -0.33% during the session and is down -6.26% YTD. The latest weekly unemployment claims came in below the forecast at 803K.

However, the previous week’s reading got revised up. It’s also emerged that another 300K+ should have been added to the number. These are self-employed US citizens who are claiming for a different benefit.

The USD experienced mixed fortunes during the day, flat versus the euro, down versus sterling, flat versus the yen, and flat versus the Swiss franc which USD is still down versus close on -8.60% YTD.

WTI oil has staged a significant recovery during the past two days, after weathering the impact of Joe Biden’s subtle renewables threat last weekend. A barrel was trading at $47.90. Price breached R2 during mid-afternoon to give back some ground late in the session to end the day up 2.21%.

The commodity fell from $49.00 a barrel to a low of $46.00 before staging a recovery this week. Optimism that the Moderna and Pfizer Covid 19 vaccines will work and get distributed quickly has also lifted Wall Street’s overall investment mood. Xmas Eve is generally a quiet time for fundamental economic news because most markets close early. Some data gets published relating to the Japanese economy in the late evening session, but markets are mostly closed for Xmas day.

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