The fragility being felt by Sterling is due to a more transmissible strain of COVID-19. The televised COVID-19 updates have indicated that it could be as much as 70% more transmissible than the previous strain. The lockdown will no doubt have an impact on Britain’s economy and the length at which the lockdown lasts will dictate the damage caused.

Brexit Irish border

The key reason for Sterling’s current vulnerability however is Brexit. If there is one thing investors do not react well to it is uncertainty and at present it is extremely difficult to call whether or not a deal is going to come to fruition.

The UK and EU has until 31st December to get a deal across the line, and there are still major points of contention to overcome. Talks were due to have ended this Sunday to have enough time to implement the deal. A UK government source has stated a deal will not be agreed unless there is a “substantial shift” on Brussels stance.

It has been said there is likely to be news on a deal before Christmas, although let us not forget how many extensions we have witnessed so far. 

Liberal Democrats have been calling for an extension due to the current pandemic situation.

Labour leader, Keir Starmer said the "brinkmanship" from both sides must end and the UK must reach an agreement this week in the national interest.

"This is people's lives, people's jobs, people's businesses," he said. "They need a deal, expect a deal, and a deal is what must happen."

David McAllister, chairman of the European Parliament's Foreign Affairs Committee has said that European Parliament will not be able to grant consent to an agreement before the end of the year as a deal was not accepted on Sunday.

McAllister also provided a potential solution however, he said one option is, should the two sides reach a deal in the coming days, would be for the European Parliament to approve it in principle by 31 December before completing the formal ratification process early next year.

In such an event, short-term measures could potentially be put in place to minimise disruption to cross-channel trade before new legally-binding rules come into force.

It is increasingly likely that the UK will emerge from the transition period without a free trade agreement with the EU.

This will mean that, from 1 January, both sides will rely on World Trade Organization (WTO) rules to govern exports and imports. Tariffs could be introduced on goods being sold and bought, potentially affecting product prices.

The pound will be in for a rough ride and the only means of salvation seems to be Boris getting a deal in a very limited time. Those selling Sterling should keep a very close eyes on developments.

Data Releases of Consequence

  • US GDP – US Gross Domestic Product data will be released later today, it is a key indicator as to the health of an economy and in this instance may also give an insight as to how badly the COVID pandemic has hit the US. Keep an eye on this release if you have a currency transfer involving the US dollar as this does have the potential to cause volatility.


  • AUD Trade Balance – During the early hours of Wednesday morning we will witness the release of Australian trade balance data. This will show the balance between import and exports and has been known to move the markets. If you have a trade involving Australian dollar and fancy a late night, keep a look out for this release.


  • US Durable Goods - The Durable Goods Orders are released later in play during Wednesday, it measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they can effect the US economy and in turn exchange rates. There is expected to be a fall from last months data from 1.3% to 0.6% which does have the potential to cause US dollar weakness.


  • US Non Defence Capital Goods Orders - The Nondefense Capital Goods Orders Excluding Aircraft, release follows on Wednesday, it measures the cost of orders received by manufacturers for durable goods excluding the defense and aircraft sectors. There is expected to be a fall from last months data of 0.8% to 0.6% which could cause market volatility.

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