Pound Stable After Rollercoaster Month
After punching above 1.35 line less than two weeks ago, the British pound retreated, and found itself in 1.29 territory on Christmas Day. However, the pound has reversed directions and managed to push back above the 1.30 line, which has psychological significance.
There was some post-euphoria after the British election, as Prime Minister Johnson won a convincing majority and will now be able to wrap up Brexit and take the U.K out of the EU at the end of January. However, what happens the day after Brexit? London and Brussels must hammer out a new free-trade deal, and there has plenty of acrimony between the sides ever since the U.K. voted to leave back in June of 2016.
The uncertainty over the new trade relationship between the UK and the EU, after decades of the UK being part of the single market, will likely weigh on the pound in the weeks to come. Buyers of the pound will certainly have to proceed with caution in the New Year, as underscored by the roller-coaster that the pound has taken investors and traders over the past two weeks.
GBP/USD is not making a lot of noise during Christmas week, but the pair continues to test resistance at 1.3030. Above, there is resistance at 1.3050, followed by the 1.3100. On the downside, the round number of 1.30 serves as immediate support and remains vulnerable. Below, there is support at 1.2940, which the pair tested early in the week.
Pacific Currencies – Daily Summary
The Chinese yuan showed some upward movement on Christmas day, as most other currencies were flat due to the holiday. USD/CNY remains close to the symbolic 7.00 line. Currently, the pair is trading at 6.9980, up 0.06% on the day.
AUD/USD has posted considerable gains this week, despite a holiday-shortened week. The pair is at its highest level since mid- July, and is currently trading at 0.6948, up 0.02%. We could see the Aussie make a run towards the symbolic 0.70 level next week.
NZD/USD has looked sharp this week, gaining close to 1 percent. The pair is currently trading at 0.6670, down 0.04% on the day. The New Zealand dollar is at its highest level since mid-July.