GBP/USD to Experience High Volatility Till End of 2020: Reuters Poll

GBP/USD to Experience High Volatility Till End of 2020: Reuters Poll

Posted Friday, December 4, 2020 by
Arslan Butt • 1 min read

Economists polled by Reuters recently anticipate that GBP/USD could experience significant volatility until the end of the year on the back of ongoing uncertainties about the EU-UK trade deal. With the end of the Brexit transition period only a few weeks away, and both sides having failed to agree to a trade deal yet, the Sterling is set to experience significant moves as negotiations drag on.

According to the poll, GBP/USD could trade in a range between 1.31 and 1.36 through December, even as diplomats indicate that a trade deal could get finalized by this weekend. While most economists expect the EU and the UK to agree to a free trade deal, a no-deal Brexit could drive significant weakness in the pair.

If the deal does get finalized by the end of this year, the Sterling could strengthen to 1.39 within a year against the US dollar and trade at around 89p against the Euro. The expectations for the GBP have been revised higher in this month’s poll – last month’s poll had economists forecasting the currency to strengthen to 1.35 against the USD.

The recent vaccine optimism has driven weakness in the US dollar and could prove especially beneficial to the GBP if Britain gets a trade with the EU before the Brexit deadline. In addition to the optimism around Britain rolling out the vaccine starting next week, a Brexit trade deal could boost investor confidence significantly in the UK and its currency.

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