The GBP/USD is on track for the second straight month of gains as investors brace for a potential Brexit deal. The pair has risen by more than 3% this month, the best-performance since July this year.
Brexit deal progress
The UK and the European Union are close to a landmark Brexit deal according to reporting by Bloomberg and CNBC.
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The reports cited a statement by Dominic Raab, the Foreign Secretary, who said that the two sides have made significant gains on key issues. On level playing field rules, he said that the two sides were finding a “landing zone” for a deal in the coming weeks.
However, the key challenge remains on fisheries, which has emerged as the most contentious issue. The EU has offered to return between 15% and 18% of the quota that their fishermen catch in UK waters. The UK wants 80% of this quota returned in its bid to grow the fishing industry.
Most importantly, the two sides have disagreed on access to UK waters. The UK maintains that, as an independent country, it has rights to its territorial waters. As such, the country has offered a gradual transition that will see EU fishermen have access to its waters. On the other hand, the EU wants to have access to EU waters in perpetuity.
Still, analysts believe that the two sides will reach a deal in the next few weeks. That’s because it will be hurt the two sides if they crash out without a deal.
Moderna vaccine update
The GBP/USD is also rising because of the overall weaker dollar as companies make strong progress on a vaccine. In a report today, Moderna (NYSE: MRNA) said that it would seek emergency authorisation for its vaccine in the US and Europe. That is after its final results showed a 94.1% success rate without any side effects. The vaccine also has a 100% success rate in preventing severe cases of the disease.
A vaccine is bullish for the British pound and other international currencies because it means less shutdowns and a swift economic recovery. On the other hand, it is bearish for the greenback, which is often viewed as a safe-haven against risks.
GBP/USD technical outlook
On the daily chart, the GBP/USD has been on an overall upward trend in the past few months. At the current price, it is being supported by the rising black trendline that connects the lowest levels in May, June, September, and November. It is also above the dynamic support of 50-day and 25-day moving averages. For forex traders, this is an indication of the overall strength of the trend.
Notably, it is about 140 pips below its year-to-date high of 1.3484. Therefore, in the near term, I suspect that the upward trend will continue as hopes of a Brexit deal rise.