While some traders probably wish they were wrapping presents and opening a nice glass of their favourite beverage, markets are considering the abundant newsflow still going on with pandemic fears, deals and no deal headlines remaining front and centre. The US Senate has now passed the huge relief bill and although it could feel a bit like a ‘buy the rumour, sell the fact’ type trade, stocks are firmer today after the abrupt, almost panic-like price action yesterday.

It is the travel restrictions which continue to linger on the market psyche though, while last night’s raised hopes of a Brexit breakthrough on fishing quotas have been roundly rejected by the EU. Rising Covid case counts in the US are another risk which is helping to support the Dollar and encourage some position squaring as traders consider the thinning market conditions which will come over the festive period.

Key challenges into the New Year will remain for the greenback, although this loss of confidence in the recovery from the new virus strain or a more active Fed touching on the brakes of monetary policy may give the world’s premier reserve currency a chance to hold on to some of its dignity. King Dollar could sure do with a welcome Christmas break after such a tempestuous year!

GBP volatility assured

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Currency moves around this time of year are always susceptible to thin volumes and liquidity. This means with Brexit noise near its peak, we should expect ever wilder price action. The latest news is now suggesting some more narrowing of divisions on fishing and the UK Parliament possibly preparing for an emergency sitting on 30 December to approve any deal. The original risk around the European Parliament not being able to ratify any agreement before the New Year has also diminished, as the EU Council can provisionally apply the UK-EU treaty pending full ratification next year.

The EU’s Barnier is due to speak within the hour so watch those headlines, with consensus now veering towards a compromise agreement between Christmas and the New Year.

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