After several days of weakness, the pound found support during the early part of Wednesday’s session, recording gains versus both the euro and the dollar following encouraging developments as the EU and the UK reach the final stretch of their protracted negotiations. The last few days have been a roller-coaster for sterling, as brinkmanship from both sides pushed investors into starting to price-in higher chances of no deal, driving losses for the British currency. Over the last 24 hours the scenario changed again and sterling recovered the week’s earlier losses, as the British removed the more controversial clauses from the UK Internal Market bill, a move seen by many as the waving of an olive branch to Brussels and the indication that London’s preferred scenario is still to avoid walking away from the negotiations empty-handed.
Bullion is holding above the key support level of $1,850 with the price consolidating after the recent rally. European stock markets opened in the green, reinforced by positive news regarding the upcoming vaccine, but this was not a disruptive element for gold, which is only showing a fractional decline. Overall, in the last few days we have seen an improving trend as investor demand recovered significantly as they bet on further stimulus from central banks, both in the short and medium trend. Moreover, the persistent weakness of the US dollar represents another supportive element for the yellow metal.
European markets opened significantly higher, following a fresh record high on US indices, as investors welcomed the prospect of a solid US stimulus package. The “risk-on” trading stance is back on most benchmarks after the $916bn Stimulus package proposal from US Secretary of Treasury Steven Mnuchin offset mounting fears due to rising Covid-19 numbers. This had an immediate effect on stock prices everywhere while European shares also benefited from another bullish leverage: Brexit negotiations. Investors were pleased to see the UK has agreed to make some concessions regarding its Internal Market Bill, highlighting the will of the UK Government to strike a trade deal with its most significant trade partner, the EU, which remains reassuring. However, we are not out of the woods yet as some parts of the US Covid-19 relief package are still under negotiation while investors are waiting for more dovish measures from the ECB tomorrow when more market volatility is widely expected.
Pierre Veyret– Technical analyst, ActivTrades
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Independent writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.