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Sterling extends gains after deadline extension

14 Dec 2020

At the start of the week, the British Pound extended its gains by over 1%, reaching 1.34 against the USD. This came after the UK and the European Union decided to extend Sunday’s deadline to discuss the post-Brexit trade deal.
“The pound is obviously relieved that the trade talks will continue between the EU and the UK,” FX strategists claimed. The GBP/EUR exchange rate was also up by 1%, at 90.63 pence. Moreover, foreign exchange strategist at Goldman Sachs in London, George Cole said, "We expect Sterling to appreciate by 1.5-2% against the Euro on the apparent progress towards a deal - or at least avoiding a no deal outcome for now.”
Goldman Sachs predicated that the Pound-Euro exchange rate would drop to 1.04, if a Brexit deal is not agreed. 
Furthermore, developments about COVID-19 vaccines lifted risk appetite, hindering the American dollar’s gains. against a basket of currencies, the USD declined by 0.2%, at 90.621 on Monday morning, close to its lowest since 2018.
In a note to its clients, ING stated, “The dollar is starting the week on the backfoot as risk appetite remains fairly upbeat on the back of vaccine roll-out news, lingering hopes around a U.S. fiscal stimulus package and some optimism on Brexit negotiations.”
On the other hand, the Australian and New Zealand dollars are also within a close range of their strongest since 2018.