GBP/USD down to $1.3281 over EU trade deal worries

Chris Lee

Sterling was one of the main losers in forex trading on Thursday and into Friday.

The dip in the value of the pound came after Britain continued to fail to strike a trade deal with the European Union ahead of the end-of-year deadline.

The two sides have until the start of 2021 to come to an agreement in order to avert the possibility of a ‘no deal’ outcome.

The US dollar gained against the pound as a result.

Sterling was seen at $1.3281 in this pair at one stage, which meant that it lost the best position it has been at in nearly a year.

In Europe, however, the single currency appeared to be preparing for a positive day.

Analysts were expecting that a data release covering German manufacturing levels in the month of January will go up by 5%.

Even though this is negligible when compared to the bigger picture, it could still provide a crucial sign that the EU bloc is beginning to bounce back following the pandemic.

Elsewhere around the world, the dollar index, which monitors the currency’s performance compared to several global competitors, barely moved.

It was logged by traders at City Index and elsewhere at 92.774 at one stage, despite the fact that the currency went up against the pound.

The currency continues to suffer amid a perception among traders that the Federal Reserve’s commitment to low interest rates and average inflation targets will persist for the medium term.

The Australian dollar managed to get back on its feet at one stage on Thursday and into Friday.

The currency was plunged into problems earlier in the week after it was revealed that the major Asia-Pacific economy had gone back into recession due to the pandemic.

However, it was seen at $0.7272 in the markets following an announcement that retail sales in the country were back on the rise.

The New Zealand dollar was also back on the up after a series of problems.

It was seen at $0.6706 in its pair with the greenback.

One of the key events on the cards on Friday will be a data release from the US looking at the jobs market in the pandemic-battered economy.

It is expected that jobs outside of agriculture will have risen by around 1.4m across August.

If this was to materialise, it would mark a downturn from the month before – when there were around 1.763m jobs created by the same metric.

Part of the reason for the US’s post-pandemic problems, say some market watchers, is that the federal government cannot agree on a sophisticated or remotely large package of responses.

With the Federal Reserve likely to continue to keep interest rates at their low levels for an extended period of time, the dollar’s long-term outlook seems to be somewhat pessimistic.

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