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Jan 04 - 11:55 AM

GBP/USD - COMMENT-Sterling's Post-Brexit Deal Swoon May Be Short-Lived

By Paul Spirgel  —  Jan 04 - 10:24 AM

GBP/USD fell on Monday as it ran out of steam following the 7.36% rally ahead of the year-end Brexit resolution, but the road ahead in 2021 still probably favors sterling bulls.

Cable was down 0.63% in early U.S. trade as markets looked ahead to Britain's struggle against rising COVID cases, with tougher lockdown restrictions possibly on the way nL1N2JE03L.

Cable could be insulated somewhat by expectations that the Fed will keep interest rates low until well after the U.S. economy reaches its 2% inflation target.

The Brexit deal has removed one key source of headline risk for sterling bulls. Despite the recent setback, cable's rise above 1.3700 in early European trade could open the way for a run at the May 2018 monthly high by 1.3773 GBP=D3, the monthly cloud top by 1.4068 and a series of April 2018 daily highs on the way to the April 17, 2018 peak at 1.4377.

The risks for sterling bulls now include potential changes in the Fed outlook, COVID counts and the possibility of vaccine delays.
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Refinitiv IFR Research/Market Commentary


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