GBP/USD to fall from the high skies as sterling faces an early reality check

GBP/USD has flirted with 1.37 as investors continue pushing the pound higher after the EU and the UK reached a Brexit deal on Christmas Eve. That may change as optimism about vaccines could be outweighed by the fast spread of coronavirus, Yohay Elam, an Analyst at FXStreet, reports.

Key quotes

“Markets are happy to see Britain leave with a deal. However, it is essential to note that the accord focuses on goods and skirts dealing with services – on which the UK is reliant. Traffic jams around Dover and issues for British businesses may begin appearing and weighing on the pound. Scottish demands to leave the UK and rejoin the EU may further weigh on sentiment.”

“Regulators approved the University of Oxford/AstraZeneca vaccine late in 2020, adding to the green light for the Pfizer/BioNTech immunization. The homegrown jab will reach Brits' arms on Monday, yet its efficacy rate is only around 70% in comparison to 95% in the Pfizer/BioNTech and Moderna jabs. Moreover, the pace of vaccinations is slower than expected.” 

“COVID-19 is raging in the UK due to the new contagious strain. Prime Minister Boris Johnson has been urged to announce a new nationwide lockdown, putting the whole country on the highest Tier 4 restrictions – or even new Tier 5 ones. Any announcement of new restrictions could weigh on sterling.” 

“Resistance is at the daily high of 1.3703, which is also the highest since 2018. Support awaits at 1.3620, a high point around Christmas, followed by 1.3525 that capped the pair last week.”