Brexit talks are now held virtually. With an EU negotiator testing coronavirus positive, negotiations will now continue through a videoconference.
With the time-factor closing in, investors look forward to a much-awaited decision on Brexit talks.
The vaccine news and rising Covid cases continue to dominate the headlines simultaneously. After Pfizer brought news about the vaccine, Moderna introduces another vaccine that is 94.5% effective.
GBP/USD
Sterling Stays Resilient Among Brexit Talk Issues
The GBP/USD currency pair is moving ahead in the hopes of a Brexit deal. The exchange pair is at a crucial level at the 1.3282 level. If it moves past the 1.3320 level, it may spurt to 1.3370 levels.
It is the end phase of negotiations, and the pandemic is hindering progress in talks. Talks cannot be held through direct communication but are held through online communication via screens. On Thursday, talks were held over video-conference when an EU team member tested positive for Covid-19.
Three main issues prevent the deal from happening. They are fisheries, the level playing field on labour, environment, and taxation, and state-aid rules. Trade policies for open and fair competition between the two regions have to be signed.
Progress is seen in various areas though sticking issues continue to hinder a speedy conclusion. Hopes that the Brexit transition period may extend keeps the Brexit pound positive.
The death toll in Britain has breached 50,000 cases. Even after Dec 2 when the lockdown period expires, restrictions are expected to remain tight. If infections decline, there will be an increase in the value of the pound, but if infections increase, the pound may weaken.
UK Retail Sales has bounced by 1.2% for October. Consumer Price Index is at 0.7% in October. With positive news, the need for additional stimulus from the government will decrease.
Time Pressure
Brussels says that time will not pressurize the EU into a compromise. It is a crucial week, and the EU countries say that it is too long for the ratification of the deal by the end of this year. It will ensure that they are implemented from January 1.
Diplomats in Brussels say that the United Kingdom has to take the necessary steps to address sticking issues like fisheries.
If the deal has to come into play by January 1, the London court has to make decisions quickly, say EU negotiators. "The process is taking too long", say diplomats.
The deal has to be translated into all languages by January 1. There are 23 official languages in the European Union apart from English. The deal will face legal challenges if the EU heads approve the Brexit Agreement, without a translation into all languages. Officials have a legal right to stall the Brexit deal if they refuse to sign the English-only document.
Possibility of a "No Deal Brexit"
Most traders are optimistic about some sort of agreement between the two economies over the Brexit deal. But there is a chance for a deal not to happen. Investors should be prepared for a big slide downwards if such a situation occurs.
As time pushes on, the European Commission is prepared for a no-deal Brexit. "It is best if there is an agreement, but hoping alone is not enough", says Belgian Prime Minister Alexander De Croo.
The European Commission is fully prepared to reach a deal with the UK, but issues have to be ironed out, without any complications. If talks do not go well, a no-deal Brexit may happen.
"We need to stay prepared for a no-deal Brexit", say EU ambassadors, after a meeting on Friday.
US Dollar Index
Thanksgiving On Thursday
Unemployment Claims have increased to 742,000 for the week ended Nov 13. The Housing sector is performing well. With coronavirus cases not decreasing, governors from Texas, California, New York, and Florida have to take important decisions.
Thanksgiving on Thursday brings a short trading week for the currency market. Data on Consumer Confidence for November, Durable Goods Orders for October are expected this week. If Jobless Claims show show an increase in number, it does not reflect well on the economy.
EUR/GBP
EUR/GBP Moves Lower
The EUR/GBP currency pair has dropped to the 0.8920 levels.
The Euro against the British Pound underperforms, with expectations of a monetary stimulus in December from the European Central Bank. The pair continues to drive lower from the September 11 highs.
GBP/JPY
November ¥140 Top Acts as Resistance
The Sterling is moving back and forth with the Brexit news. The GBP/JPY currency pair faced resistance at the ¥140 level. As the deadline nears for the deal to happen, investors are confused about the outcome of the deal.
The¥ 137 level is providing a strong base, below which the currency pair is unable to break down for the past two weeks. The ¥135 level will not hold the currency pair if a no-deal Brexit happens, especially as the 200-SMA is placed at this level.
