Pound tumbles from three-year high

  • Pound tumbles from three-year high on renewed no-deal Brexit fears

    The pound has traded in a wide range over the last month as the currency was rocked by a general election and no-deal Brexit jitters.

    This saw the GBP/EUR climb as high as 1.20 before retreating back to 1.17, while EUR/GBP accelerated to 0.85.

    Meanwhile, GBP/USD traded between 1.34 and 1.29, whilst EUR/USD climbed from 1.10 to 1.11.

     

         What’s been happening? 

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    The pound roared higher through the first half of December, culminating in the currency soaring to a three-year high after Boris Johnson secured a massive majority in the general election.

    However Sterling was quick to fall from grace, relinquishing all of its election night gains within a week as no-deal Brexit fears were re-ignited by Johnson’s move to legally block any extension to the Brexit transition period. 

    The US dollar traded fairly robustly through most of December, but closed out 2020 on a sour note after demand for the safe-haven currency took a hit from US-China trade optimism.

    Meanwhile, after a rocky start to the month, the euro found itself performing more positively through the latter half of December as it was buoyed by the weakness of its peers.

     

         What do you need to look out for? 

    In the UK the focus will remain squarely on Brexit, with upside in the pound potentially capped by fears Johnson will struggle to negotiate a new trade deal with the EU by the end of 2020.

    Meanwhile, a wide-ranging review of the European Central Bank’s policy strategy will begin in January and is likely to keep EUR investors on their toes.

    For USD investors the focus may be on US politics, with impeachment proceedings against President Trump potentially sparking some volatility in the US dollar.

     

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