Sterling ends 2020 in style

The British pound has added further gains in Thursday trade. Currently, GBP/USD is trading at 1.3662, up 0.28% on the day.

Pound hits 31-month high 

A light data calendar during Christmas week has not dampened enthusiasm for the British pound. The currency started off the week on the wrong foot but has easily recovered these losses and then some. Earlier in the day, GBP/USD rose to 1.3686, its highest level since May 2018.

With the markets experiencing low liquidity this week, they are vulnerable to volatility based on geopolitical events. One such development this week has been the approval in the UK of the Astra Zeneca vaccine for Covid-19. This has not only boosted the pound, but has also contributed to the global recovery trade and further US dollar rotation. This vaccine is considered a game-changer in the battle against Covid, as it can be stored at room temperature, unlike the Pfizer vaccines which must be stored at subzero temperatures.

The US dollar continues to look lost and has fallen 2.47% against sterling in December. Sell-offs of the currency have become an almost daily occurrence, and the near-term prognosis for the dollar is bleak. The US is facing the grim reality of twin deficits (budget and trade), and things aren’t expected to get better anytime soon. The new 900 billion dollar stimulus bill will add to the US debt, and the incoming Biden administration is expected to add even more stimulus. The dollar’s woes have led to investors dumping their US assets, and we can expect to see a continued global rotation of US dollars into major and commodity currencies into the New Year.

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GBP/USD Technical

  • There is resistance at 1.3713. The next resistance line is at the round line of 1.3800
  • 1.3536 is the first line of support. Below, there is support at 1.3449
  • The pair crossed above the 10-day MA line on Wednesday and continues to move higher

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.
Kenny Fisher

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