Daily Alert – Friday 18th December 2020: GBP falls as deal hopes sour

Mark NugentDaily Alert, Dec 2020

Daily Alert – Friday 18th December 2020: GBP falls as deal hopes sour

This week was all about the GBP. UK PM Johnson had a call on Sunday with EU President Ursula von der Leyen and it was decided to continue the Brexit talks on Monday. The GBP gapped up on the Sunday night open. The positive mood endured until Thursday when a second call resulted in a considerably less bullish tone from both sides. UK government ministers said that no-deal was the likely outcome, fisheries was a real stumbling block and a new concern arose – the EU wanting to discount their recently agreed relief package from the state aid rules being negotiated. The GBP began to fall towards the end of the Thursday candle and has continued down today, but still well up on the week.

As I mentioned last Friday, it was my intention to trade the GBP aggressively. I placed three long trades on GBPUSD which yielded 0.70%, 3.12% and 1.09%. The “normal” trade was the one in the middle, which was a good, solid trade and the “aggressive” trades where the first and third which delivered disappointing reward to risk ratios. Ho hum. A brief video of these three trades is available for members.

Broad market sentiment was risk-on from the start on Monday before souring to indecisive on Covid concerns as New York City was shut down again. Indecision ruled the roost on Wednesday and Thursday before moving risk-off on Friday on Brexit and Covid concerns.

Over the week, and as of 1700 GMT, global equity indices are flat. Oil rose over two times daily ATR and GOLD rose around 0.8 times daily ATR. On currencies, the JPY is very slightly down and only the AUD is playing its part by moving up. The NZD moves down along with CAD (despite oil rising). Things get a bit weird when we have three days of indecisive risk sentiment. The USD continues to fall as the US relief bill grinds onwards. The EUR continues its rise.

Trade of the week was GBP strength, even with today’s fall. “Called it”, as they say.

That’s it from me. I will be back on Monday 4th January. Having said that, I will continue to trade GBP strength when appropriate, so you may get an email from me on that.

Thanks for your interest over the year. Have as good a Christmas and New Year as you can. 2021 will be better.

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