The Dollar Rally May Be Brief on the Post Brexit Deal

The Dollar Rally May Be Brief on the Post Brexit Deal

In a year that flipped so many norms, the dollar fell. The global reserve currency lags behind its G10 peers, but its decline is most evident in some of the smaller markets on the periphery of global finance. The Kyat added 11% against the dollar, the best performance in Asia. The uptick is an amplified version of what is playing out in many emerging markets when home use orders cut discretionary spending and drove imports down.

On Christmas Eve, a post-Brexit agreement was finally reached. Over the weekend, the EU and the UK released the full text of their post-Brexit deal, which, among other things, includes details on trade, enforcement, and dispute resolution.

The agreement must be ratified by the respective parliaments. On fisheries, which is the most contentious issue, the two sides agreed on a transitional period of five and a half years, during which EU fishing vessels will continue to have full access to UK waters, with a 25% gradual reduction in fishing quotas.

USD Weakness to Continue Into Post Brexit
In the previous session, the dollar fell against the Japanese yen, the dollar fell from 103.64 in Australia to 103.37 at the opening of the European session due to general weakness in the dollar and then rebounded sharply back to 103.65 in New York due to growth in the yield of Treasury bonds and US stocks before moving sideways.

Although the single currency met renewed selling at 1.2187 in Australia and briefly dropped to 1.2155 in the morning in Asia, the price then surged to 1.2200 in the European session on the weakness of the US dollar but fell only to 1.2161 in opening in New York. However, the pair then rallied with the cable to session highs of 1.2220 and then retreated to 1.2173 due to profit-taking.

Meanwhile, GBP/USD peaked at 1.3619 as hopes for a post-Brexit trade continued to support the pound. The UK and EU announced a post-Brexit deal on Christmas Eve. GBP/USD is technically bullish but could be rebalanced after Brexit.

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Author : Azeez Mustapha

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Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.