The week seems to be starting with the gaps in the opening of the Pound pricing, which has arisen after the British and EU sides decided to extend talks on the brexit agreement. The pound has definitely gained this morning compared to Friday's closing.
According to Bloomberg's data, the GBP/USD exchange rate seems to be rising by as much as 1.4% to 1.3408, which may be the biggest daily increase since October 21. The strengthening of the GBP was to increase when EU chief negotiator Michel Barnier said he saw the way to agreement with the UK on a trade agreement on brexit.
Two forecasts for the pound
According to data from the currency options market, the weekly volatility of the GBP/USD pair could be as high as 500 pips, of which the opening gap alone was over 100 pips. According to JPMorgan, if no agreement is reached, the pound could lose about 5-6 percent. This could mean a fall in the GBP/USD exchange rate to 1.2500. Morgan Stanley, on the other hand, indicates an increase to 1.3600, but if an agreement is reached by the end of 2020. Therefore, it seems that the volatility in pairs with GBP may remain elevated in the second half of December and this market is becoming one of the more interesting.
Oil: the seventh week of increases in a row
The prices of crude oil also look interesting. The WTI barrel on Monday seems to be rising, which marks the beginning of the seventh week of growth in a row, to its highest level since the beginning of March - above 47 USD. Investors still seem to hope that mass vaccinations will increase demand for fuels in the rest of 2021. Even the lockdown introduced in Germany is not able to shake off optimism and risk appetite.
A tanker exploded in the port of Jeddah in Saudi Arabia on Sunday. It took place three weeks after another tanker in the region was damaged. OPEC+ will meet again on 4 January to analyze the recent behavior of producers and demand. The threat to the increase in supply may be the lifting of sanctions by the United States on Iran, which could increase production by 4.5 million barrels of oil and increase exports by 2.3 million barrels. From the new year OPEC+ is expected to produce 500 thousand more barrels of oil per day.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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