Sterling has underperformed since the UK clinched a narrow Brexit trade deal with the EU on Christmas eve. The consensus opinion among analysts is that this is not an optimum deal for Britain.
While there is an agreement for zero tariffs on trade goods, there is no agreement whatsoever on services including the all-important financial services and the fear going forward is it will reflect poorly on the UK’s economic prospects and may mean the Bank of England will have to loosen monetary policy by further cutting interest rates in 2021. Parliament is due to vote on the Brexit deal tomorrow, while the EU will ratify the deal in early January.
Also, undermining the Pounds performance, was the reported 41,385 new Covid cases on Monday, a daily record. A report published today from the London school of Hygiene and Tropical medicine concluded that Britain must vaccinate 2 million people a week to avoid a third wave of the coronavirus outbreak.