GBP/USD: Upbeat mood to fade quickly

GBP/USD has been advancing amid hopes for a Brexit deal and fresh US stimulus but PM Johnson is losing political credit amid his handling of coronavirus while Senate Republicans do not back Trump on stimulus, FXStreet's Analyst Yohay Elam reports. 

Key quotes

“On Friday, the UK Prime Minister Boris Johnson told the nation that it should prepare for a no-trade deal Brexit after EU leaders refused to cede ground nor intensifying talks with Britain. However, Bloomberg is reporting that officials are ready to back down on the controversial Internal Markets Bill (IMB) which knowingly violates the Withdrawal Agreement that Johnson signed last year. Is there room to be optimistic about Brexit talks? Perhaps, yet the recent past has shown that the mood around negotiations tends to shift quickly.” 

“The recovery is at risk due to a sharp increase in COVID-19 cases, compounded by a political crisis. Infections are rising especially quickly in northern England, where long-run grievances of dictates from London have resurfaced. The public is tired of limitations and also disapproves of the government's handling of the crisis. In turn, that may lead to incompliance and further lengthening the pain for the economy.”

“President Donald Trump has also contributed to lifting GBP/USD by stating that he wants a larger stimulus package than Democrats. However, Senate Republicans have taken the opposite direction and back only a ‘skinny’ relief deal.”