On Wednesday, PM Boris Johnson’s part of the Internal Market Bill and plans for a “revised” Brexit trade deal was struck down by the House of Lords.
Although Johnson says he plans to pursue the clauses that were struck down, the sterling surged higher as there is now a better hope for a Brexit-deal.
The pound also started this week negatively on Monday but quickly paced up on vaccine news released on Monday. As markets continue to digest the news of progress in a major coronavirus vaccine effort, this news is making investors more optimistic about Britain’s outlook.
The service sector of Britain was hit hard by the pandemic. However, the news on coronavirus vaccine served as a hope, which combined with some signs of resilience in Britain’s job market is boosting sterling.
According to Stephen Innes, Chief Global Market Strategist at Axi:
“A vaccine could make the biggest difference to the economic outlook for those countries that have struggled the most, especially with large service sectors like the U.K.”
The rising hopes of U.K. and the European Union closing in on a deal is also serving as a support for the British Pound.
The pound’s gains will likely sustain if advances on Brexit optimism continues.
Analysts advised caution over news on coronavirus vaccines, as more complications are always possible.
On the other hand, although the Brexit has a positive outlook for now, there still isn’t a deal struck and a no-deal Brexit may still be looming in the dark.
In the following weeks, the pound’s outlook will be the main focus after the U.S. Presidential Elections that held last week.
The U.K and E.U. is expected to reach a deal before the end of November.
If a deal is struck between U.K. and E.U., the sterling would rise as well and will lead to a huge demand in the sterling.
However, if negotiations went poorly and a no-deal is struck, the sterling’s outlook may begin to have a downturn.
In the daily charts of GBP/USD, the pound inched higher against the dollar early morning in the Sydney session.
As what we can see in the charts, the pair broke out from the resistance level at 1.31966 yesterday. With the ongoing talks of a possible Brexit-deal between the U.K. and European Union, we may see a strong upside pressure against the dollar.
With the dollar falling against hopes in the coronavirus vaccine, the pair may continue to surge up and test the resistance level at 1.34872. Once the price breaks from this resistance level, the pound would reach its new highs against the previous high it reached last August.
However, if the price broke down from the support level at 1.31966, we can expect the pair to test the support level 1.28685
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