On the first trading day of the year, and trading outside of the EU, the pound sterling was lower against the euro, but higher against the US dollar. The Brexit deal that was signed just before Christmas provided rules for agriculture and fishing, but failed to provide coverage for the financial sector in Britain. Fortunately, an extension will temporarily allow participants to use EU platforms for swaps trading. The avoidance of the disruption was enough to provide relief for Forex traders, who helped push sterling higher.
In London trading as of 10:47 AM, the EUR/GBP was trading higher at 0.898 pence, up 0.5173% and moving away from the session trough of 0.89334 pence. The GBP/USD was higher at $1.3692, a gain of 0.1653%; the pair has ranged from a low of $1.36379 to a peak of $1.37040. The GBP/JPY was lower at 140.70101 yen, down 0.2502%.
Sterling Outlook to be Driven by Virus Impact
Sterling continues to be weighed by news that the infection rate of a new strain of COVID-19 has grown in Britain, with the number of new cases hitting a new record. This prompted the prime minister to suggest that more restrictions are likely as a result. Currency strategists say that the Bank of England will be likely to further extend the current low interest rate environment, at least and until there is some containment of the coronavirus. While the BoE's Monetary Policy Committee can now put the Brexit impact to bed, the long-term economic repercussions of the virus are likely to take center stage in their decision-making process.