02/12 – No deal risk back on sterling’s table

02/12 – No deal risk back on sterling’s table

GBP: Barnier briefs EU on no-deal risks

EUR: Still pushing higher

USD: Stimulus chatter back to hurt the USD


GBP has finally broken through that 1.34 level in GBPUSD that it has been butting up against for a week or so as dollar support finally gave way.

Sterling has also been supported from positive Brexit noises in the past 24hrs with journalists disagreeing on the stance of the talks – whether they are in “the tunnel” – but all noting that their EU sources believe a deal is possible very soon. That being said, reports also suggest that the sticking points of fisheries and a level playing field remain and without that, there can be no deal between the UK and EU.

We maintain our guidance that a no-deal outcome would lead GBPUSD back towards the 1.25/1.26 level with GBPEUR slipping below 1.09. Comments from Michel Barnier to EU ambassadors that there may be a no-deal have shown that the market will not let too much optimism become embedded.

News that the UK has become the first western country to approve a Covid-19 vaccine will also be supporting the pound this morning.


EURUSD has taken up the charge in beating up on the USD this morning and is up 1.33% against the greenback since the beginning of the week. So far, there have been no noises from the European Central Bank that these levels are untenable and while ECB speakers continue to show that differences remain on the level of stimulus, the single currency will remain bid.

US dollar

Support for the USD gave way overnight as markets drove risk assets higher on positive vaccine news and conversations between US politicians that  a bipartisan group of US senators have agreed on a fiscal stimulus package worth USD908 billion. This is still a small package in the grand scheme of things and the risk remains that Democrats in the House decide that this is not enough.

In the meantime however, the underpinning of the move lower in the USD of a vaccine and continuing conversations on stimulus should keep the USD on the back foot.


The only currency in the G10 that has yet to grab some gains against the USD this week has been the Japanese yen as markets continue to use the JPY as a funding currency for risky bets elsewhere. This should continue as we head into 2021; the major risk of a JPY recovery coming from a disappointing/disjointed roll out of the vaccine.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.