As one race against time ended on Christmas Eve, when the UK and EU finally got a post-Brexit free trade deal over the line, another began: the race to pass the EU (future relationship) bill before the expiry of the Brexit transition period on New Year’s Eve. The wheels well and truly got in motion yesterday: having been signed in Brussels during a brief ceremony in the morning by Ursula von der Leyen and Charles Michel, MPs and peers gathered in Westminster to approve the bill. Aware that both houses (Commons and Lords) were intent on providing a clear path for the bill to pass into law, the pound began a steady march higher against the dollar yesterday.
It was announced that the Queen had given royal assent to the bill at 12.25am this morning. This followed a frantic 14-hour parliamentary process that saw MPs unanimously vote it through by 521 votes to 73, before the House of Lords gave its approval late yesterday – radically reshaping the UK’s relationship with Europe. Prime minister, Boris Jonson said: “11pm on 31 December marks a new beginning in our country’s history and a new relationship with the EU as their biggest ally. This moment is finally upon us and now is the time to seize it.” In the early hours of the morning, the pound to dollar rate hit its highest level since 2018 as it reached mid-range between the 1.36 and 1.37 levels.
The pound was also given a helping hand by dollar weakness and news yesterday that UK medicines regulators have approved the Oxford University/AstraZeneca vaccine – raising hopes that Covid-19 immunisation could be scaled up in the New Year.
Dollar Sinks Under the Weight of Us Stimulus Hopes
The dollar continued to be trampled by US stimulus hopes yesterday, which have reduced demand for the safe-haven currency since President Trump signed a coronavirus aid and spending bill on Sunday. The move lower came despite US Senate Majority Leader, Mitch McConnell’s move to block Democrats’ efforts to quickly pass a measure to increase COVID-19 relief payments to $2,000.
Despite uncertainty about the size of the relief payments, analysts are betting that the dollar will be dragged even lower in 2021 by President-elect Joe Biden’s determination to push for more economic support measures.
The dollar will be hoping for a much-needed boost from the latest jobs data today – although forecasts suggest it could bring more bad news for the embattled currency.
The pound vs dollar rate still has a long way to go to break through the 1.37 barrier for the first time since 2018. However, with the dollar floundering, the Brexit deal finally done and the immunisation process ramping up in the UK, it will be an interesting New Year for the pair.
Get in touch using the form to discuss these factors in further detail, I’ll be happy to respond personally.