GBP/USD in high spirits as EU and UK inch closer to Brexit deal

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on Dec 24, 2020
  • The GBP/USD pair is in high spirits today as traders react to the likely Brexit deal.
  • The two sides are set to announce their agreement today.
  • The pair is also rising because of the overall weaker US dollar.

The GBP/USD is rising as forex investors react to the high likelihood of a Brexit deal. The weaker US dollar has also contributed to this price action. The pair is trading at 1.3545, which is the highest it has been since December,18.

GBP/USD
GBP/USD in high spirits

EU and UK on the cusp of a Brexit deal

The European Union and the United Kingdom are close to a Brexit deal, according to reputable media sources.

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According to the Financial Times, the two sides said that they were close to a deal after making significant concessions.

A separate report by Bloomberg went further. It said that the two sides had already reached an agreement and that they will unveil the details today. Boris Johnson will also deliver a press conference to explain the UK’s victories.

The details of the deal are not yet known. However, Bloomberg said that the UK had agreed to lower the quota of fish caught in the UK to 25% over five-and-a-half years. That’s a sharp reduction considering that the UK had initially put the figure at 80%.

The two sides are also said to have reached an agreement on fair-trading practices that are aimed at ensuring that firms between the two sides operate under similar regulations.

In addition to Brexit, the GBP/USD is reacting to the recent weak economic data from the United States. Yesterday, data from the US showed that core and headline durable goods orders rose by 0.4% and 0.9% in November, the lowest increase since August.

Additional data revealed that the country’s new and existing home sales declined sharply in November. New sales declined by 11% while existing ones fell by more than 2% mostly because of the new lockdowns.

Consumer sentiment, current conditions, and consumer expectations by the University of Michigan rose to 80.7, 90.0, and 90.0. This was lower than what economists were expecting. Additionally, personal income and expenses also declined sharply in November.

The GBP/USD is also rising in reaction to the new stimulus crisis in the US. Donald Trump has threatened to veto the recently-passed $900 billion stimulus deal and demanded that congress increases the amount of stimulus checks to $1,200.

GBP/USD technical outlook

GBP/USD
GBP/USD technical chart

On the four-hour chart below, we see that the GBP/USD pair has risen for the past 9 consecutive four-hour sessions.

It has moved above the 25-period and 15-period exponential moving averages while the Relative Strength Index (RSI) is approaching the overbought level. Also, the momentum oscillator has continued to rally.

Therefore, we believe that this trend will continue as bulls aim for the next resistance at 1.3621.

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