The Pound to US Dollar (GBP/USD) exchange rate climbed to weekly highs as the UK Parliament voted on the Brexit trade deal. The pair are currently trading around $1.3597.
Pound (GBP) Strengthens as Brexit Deal Approved
The Pound has strengthened on both the approval of the Brexit trade deal and the Oxford-Astra Zeneca vaccine today.
The UK has ordered 100 million doses of the new vaccine – enough to vaccinate the majority of the population.
There are, however, still increasing nerves over the short-term outlook, as coronavirus fears continue to intensify. As millions more in England have been placed in tier four restrictions.
On Tuesday, the UK reported a record increase in new infections of over 50,000, the largest daily increase since the pandemic began, with more areas of England expected to be put into tier 4 restrictions today.
The House of Commons have debated and voted on the Brexit UK/EU trade deal for the majority of the day, approving the deal. The whole process is scheduled to be completed later this evening, with the House of Lords currently backing the legislation.
US Dollar (USD) Rangebound over Stimulus Hopes
U.S. Senate Majority Leader Mitch McConnell on Tuesday blocked a vote on increasing Covid-19 relief payments to $2,000, adding another delay to negotiations over the fiscal stimulus.
However, market sentiment stayed upbeat as investors remained optimistic that a stimulus deal will be reached.
Optimism remains high despite Senior Republican Representative, Kevin Brady, sceptical about the new stimulus, saying:
‘For me, I worry that this whopping $463bn won’t do what’s needed – stimulate the economy, or get the jobless back to work.’
Furthermore, the hope that Covid-19 vaccines will facilitate a global economic recovery lessened demand for the safe-haven Greenback.
GBP/USD Outlook: Could Stricter Restrictions Damage the Pound?
Sterling investors will be looking to keep an eye on Health Secretary Matt Hancock’s tier review speech to Parliament this afternoon, with many parts of the UK expected to head to higher restrictions the Pound looks as though it could struggle into the New Year.
USD exchange rates may face another jolt on Thursday with the release of the latest set of US jobless claims data.
Forecasts point towards another sharp increase in initial jobless claims in the last week, highlighting the continued deterioration of the US labour market due to the coronavirus pandemic.
Evidence that unemployment continued to mount throughout the month of December will encourage greater worries over the US economy, leaving the US Dollar prone to further losses.