GBP / USD is trading at its highest level since May 2018, but just keep in mind that weak liquidity conditions still prevail this week.
The upward push in recent sessions is due more to the dollar lower than the pound’s rise, with cable now trading at its highest levels since May 2018 at 1.3668 in European morning trade .
However, the big caveat here is that this happens under limited liquidity conditions, as the market is still in a vacation mood before real money flows start to return next week.
In terms of sterling optimism after the Brexit trade deal, I would say there isn’t much to it and we could still see a ‘buy the rumor, sell the fact’ game. come true as the new year approaches.
I mean, EUR / GBP is testing the current 0.9000 level again and is coming back below its 100 day moving average of 0.9035. The 200-day moving average at 0.8979 will be the key to watch in gauging the sentiment of the pound heading into next year.
As for cable, this also needs to be offset by dollar sentiment – which isn’t too good as speculative trades continue to pile up more misery on the greenback in thin trading during the holidays this week. .
If real money flows threaten another rout for the dollar, the cable could turn to 1.4000 next based on the charts. So, if one were to bet on the underperforming pound after Brexit, it would be better to focus elsewhere than against the dollar.