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Pound on a rollercoaster ride - Market Update 22/12/2020

Updated: Aug 17, 2021

roller coaster

Yesterday saw twists and turns in the value of GBP vs all major pairs with the impact on the Covid-19 Christmas lockdowns and new mutation coming into effect. The market initially saw a sell off, hitting a low of the day at 1.3186 before rebounding quickly up to the 1.35 mark later in the evening. These wild swings are reminiscent of initial Brexit volatility, with both Covid-19 and Brexit now in control of the market expect more swings on the lead up to Christmas. On the Brexit side Boris Johnson has sent out a last ditch effort to get a deal with the EU as he suggests Britain would see the EU reduce the value of the fish it catches in U.K. waters by about a third. Last week the U.K. was insisting the EU accept a 60% cut. This could be enough to get both sides to agree to a deal but the EU are yet to respond with a definitive answer. Trading throughout yesterday had a risk off feel with the markets taking in new Covid-19 strains accompanied by the rising US and China tensions as we saw global stocks sell off and the FTSE finishing up the day at 1.73% down. As expected in a risk off market the value of the USD and Gold rose with the safe heavens benefiting from fresh inflows from fears of another stock market turndown.

In the US the Senate and the House has now passed the 900 Billion Dollar Covid-19 relief package with the final approval landing on President Trumps desk later today. This comes after months of infighting between the Republicans and Democrats. Whilst this aid is much needed this comes as underwhelming to the market who was pricing in as much as 2 trillion USD a few months ago. This also raises questions about further aid in the future.

Looking ahead to today the Pound has resumed it's choppy movements with a slide back into the 1.33s with the Dollar Strength Index rising by 0.3% in the Asian trading sessions.


Data releases (UK time):

9:30am / UK Current Account Previous -2.8b / Forecast -12.9B

9:30am / UK Final GDP q/q Previous 15.5% / Forecast 15.5%

9:30am / UK Public Sector Net Borrowing Previous 21.6B / Forecast 26.3B

13:30pm / US Final GDP q/q Previous 33.1% / Forecast 33.1%

13:30pm / US Final GDP Price Index q/q Previous 3.1% / Forecast 3.1%

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