Pound struggles on Brexit deal concerns

The pound struggled to find direction on Tuesday as jubilation over the signing of the recent UK-EU Brexit deal began to fade.

However, Sterling is strengthening this morning following news that the Oxford-AstraZeneca coronavirus vaccine has been approved for use in the UK.

The vaccine news is pushing GBP/EUR higher at €1.1045 and GBP/USD is climbing to $1.3545 so far this morning. GBP/CAD is subdued at C$1.7318, while GBP/AUD and GBP/NZD are slipping at AU$1.7686 and NZ$1.8851, respectively.

Looking ahead, will the pound receive a boost during today’s session after the UK approved its second coronavirus vaccine for use?

What’s been happening?

The pound was mostly rangebound through yesterday’s trading session as the euphoria that the UK will not face a no-deal Brexit began to fade.

The lack of direction in Sterling came in part due to worries that the UK-EU trade deal doesn’t include services, stoking concerns that the largest part of the UK economy could still face some disruption at the start of 2021.

Further limiting the appeal of the pound were fears that the UK could face stricter coronavirus restrictions, or even a new national lockdown in the new year amidst a worrying rise in domestic coronavirus cases.

Coronavirus concerns also saw the Euro trade in a narrow range on Thursday as reports that the mutated strain first detected in the UK has been detected throughout Europe stoked fears the continent could face another surge in cases.

Meanwhile, the US dollar was on the defensive on Tuesday as an upbeat market mood dented safe-haven demand.

This appeared to be driven by hopes for additional US stimulus, after the US House of Representatives passed a bill to increase direct coronavirus relief payments from $600 to $2,000.

What’s coming up?

Turning to today’s session, the Oxford-AstraZeneca coronavirus vaccine approval for use looks to support the pound today.

This approval gives the UK enough to vaccinate the whole population, boosting hopes of a quicker economic recovery in the UK.

Also in focus will be the parliamentary vote on the UK-EU trade deal.

This is widely expected to see the bill pass through the House of Commons, although the potential for some opposition from those within the Conservative party may raise concerns over the unity of Boris Johnson’s party.

In Europe, EUR investors will be keeping a close eye on coronavirus developments as they look for any signs that the new coronavirus strain is being detected in any notable numbers on the continent.

At the same time, we may see the US dollar extend its slide if the market mood remains broadly upbeat.