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Dec 03 - 01:55 PM

GBP/USD - COMMENT-Sterling Surges Past September's Peak On Brexit Hope, Dollar Dismay

By Randolph Donney  —  Dec 03 - 11:40 AM

Sterling surged on Thursday past this year's prior peak of 1.3481 against the dollar, which it struck in September, and now has its sites set on highs of the last two years, providing the broader dollar rout persists nL1N2IJ1EV and negotiators forge a Brexit deal before the Dec.
31 deadline.

The 2019 high is at 1.3516 and 2018's is at 1.4377.

The market assumption is that, despite hard-bargaining rhetoric, neither the UK nor the EU wants a chaotic no-deal Brexit in the midst of the pandemic nL8N2IJ1PD, even though vaccinations should begin soon in the UK, and likely thereafter in major economies, making such a split slightly less daunting than before.

But the prospective vaccination schedule should also reinforce the reflation trade that is sending the dollar sharply lower.

Sterling this week has also risen above its down trend-line dating back to 2007 and 2014 highs, now at 1.3414.

Assuming the rally isn't derailed by a no-deal Brexit bombshell, a breakout and close above 2019's high and the 38.2% Fibo of the 2014-2020 drop at 1.3621 would target 2018's 1.4377 high by the 50% Fibo at 1.4303.
Net spec IMM shorts offer fuel for gains even as daily RSIs enter overbought territory.

There's an interim 161.8% Fibo target at 1.3988 off September's base.

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Source:
Refinitiv IFR Research/Market Commentary

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