Forex Market: GBP/USD gains as Brexit trade deal, US stimulus package support risk sentiment

GBP/USD, along with other risk-sensitive assets, rose on Tuesday in the wake of EU-UK post-Brexit trade agreement and supported by optimism regarding US COVID-19 relief package.

Last Thursday Britain secured a narrow trade deal with the European Union, just several days before it parts ways with one of the largest trading blocs worldwide.

Investor risk appetite also received a boost after the US House of Representatives voted yesterday in favor of raising stimulus payments to qualified Americans from $600 to $2,000, with the measure now awaiting the US Senate’s vote.

The $2.3 trillion stimulus package, signed into law by President Donald Trump over the weekend, includes $1.4 trillion in spending to fund government agencies and $892 billion in coronavirus relief.

“With the Brexit … and the U.S. stimulus deal now in the rear-view mirror, there is a sense of relief that we have avoided the respective worst-case scenarios,” Stephen Innes, chief global market strategist at AxiCorp, was quoted as saying by Reuters.

Against a basket of six major peers, the US Dollar was a notch weaker, while hovering just above the 2 1/2-year low of 89.72 registered on December 17th.

As of 10:00 GMT on Tuesday GBP/USD was edging up 0.21% to trade at 1.3474, while moving within a daily range of 1.3439-1.3523. Last Thursday it climbed as high as 1.3619, or its strongest level since December 17th (1.3625). The major pair has risen 1.22% so far in December, following another 2.87% advance in November, or its biggest since July.

In terms of economic calendar, today market players will be paying attention to the October report on house prices in the 20 largest US cities due out at 16:00 GMT.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 30.1 basis points (0.301%) as of 9:15 GMT on Tuesday, up from 22.1 basis points on December 28th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3484
R1 – 1.3538
R2 – 1.3631
R3 – 1.3685
R4 – 1.3740

S1 – 1.3391
S2 – 1.3337
S3 – 1.3244
S4 – 1.3152