GBP/USD: Three reasons to be bullish

With the US elections in the rear-view mirror and looking toward year-end, GBP/USD has room to rally. The mix of an end to the Brexit saga, the UK's vaccine preparedness and its generous central bank all set up the pound for upside success, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“There are reasons to believe that London and Brussels will eventually strike a deal. First, negotiators have made substantial progress on most topics, leaving only two main issues on the agenda – fisheries and state aid. Second, the incoming Joe Biden administration in America has warned Britain that any risk to the peace agreement in Ireland would deny the UK a trade deal with the US. Third, circling back to New Year's Eve – there is nothing like a deadline to sharpen minds. Both sides would prefer smooth trade in the post-Brexit world and may save the most painful compromises to the last minute.” 

“There is at least one thing the UK got right – its vaccine strategy. Officials set up a task force handling immunization and this group successfully secured deals worth 355 million vaccine doses from seven companies that are at different stages of trials. The total of 355 million doses, including 200 million doses within Phase 3 trials, puts the UK on a sound footing to exit the crisis faster than its peers.”

“Each time the Bank of England announced it would buy more bonds – in March, June, and November – sterling jumped. Why? These moves by the BoE were quickly followed by announcements of additional fiscal stimulus by the government. In turn, that means a stronger economy – and a more robust currency. The US is hesitating about additional fiscal stimulus and central bank orthodoxy in Europe is still limiting such bold moves. That leaves room for sterling to shine.”