Great Britain in a new “crown”: euro and pound fall

At the end of last week, the major currencies showed an increase. The greatest gains against the US dollar were shown by the British pound (+ 2.30%). The Australian dollar rose 1.19%, the euro 1.18%, the Swiss franc 0.75%, the New Zealand dollar 0.73% and the Japanese yen 0.63%. The Canadian dollar was down 0.10%.

On Friday, December 18, trading in the euro ended down 0.11% to 1.2252. The single currency was under pressure amid a general strengthening of the dollar due to protracted negotiations between the UK and the EU, as well as the delay in agreeing on new assistance from COVID-19 in the amount of $ 908 billion. Also, the US dollar could strengthen due to adjustments in positions ahead of the end of the year and Christmas holidays.

British Prime Minister Boris Johnson said the most likely outcome for the UK would be to leave the EU without a deal. The head of the European Commission Ursula von der Leyen and the chief EU negotiator Michel Barnier also said that the issues with fisheries are difficult to solve and they may not have time to conclude a trade agreement in the allotted time.

In the American session, the EUR / USD pair dropped to 1.2226. The single currency received support from the euro crosses, so the balance line kept the price from falling further.

Scheduled statistics (GMT + 3)

  • At 14:00 Britain is to release the Confederation of British Industrialists’ retail sales index for December.
  • At 18:00, the eurozone is to publish the December consumer confidence indicator.

Current situation

At trading in Asia, the euro is worth 1.2196. The minimum is fixed at 1.2179. The pair dropped 73 points. The British pound rate fell 185 points to 1.3336. It lost more than 1% since the UK and the European Union were unable to complete negotiations on a Brexit trade deal by the evening of December 20. The negotiators did not meet the deadline recommended by the European Parliament. Now the European Parliament will not be able to ratify the agreement under the simplified scheme until the end of the year, if it is adopted. Further discussion of the issue will continue on Monday, December 21.

Also, the news that many countries are closing their borders with Great Britain due to the spread of a new strain of coronavirus could have a negative impact on the euro and the pound. A tough lockdown is being introduced in the United Kingdom on Monday. Non-food stores have closed. Residents are prohibited from leaving their homes under threat of a large fine. Since the news came over the weekend, major decisions on the new restrictive measures are expected today.

The price is at 67 degrees Gann. Considering the morning news and the market opening, I expect further decline for the euro to 1.2165. Although most of the euro crosses are on the buyer’s side, the single currency will weaken against the background of the general strengthening of the dollar by the close of the day. Resistance is 1.2230 (balance line). With the new hour, the value will decrease by 2-3 points.

Positive news is needed to close the gap. They are not present at the moment, except for the adoption of the aid package in the United States. It’s also worth noting that weekends in the US start on December 24th. Due to the Christmas holidays, the market volume will be reduced. Low volume – high volatility.

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