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Forex Market: GBP/USD hits a 12-week high as positive vaccine news bolster risk sentiment, Brexit negotiations continue

GBP/USD hit a fresh 12-week high in early European session on Monday, after more positive news over COVID-19 vaccine progress bolstered demand for risk-sensitive currencies.

AstraZeneca said on Monday that its vaccine could be about 90% effective against the coronavirus with no serious side effects.

Additionally supporting sentiment, a top US health official said over the weekend that COVID-19 vaccinations could begin by mid-December.

“Markets are following pandemic news at the moment – vaccine optimism seems to be supporting risk assets for the time being,” Paul Donovan, chief economist at UBS Global Wealth Management, wrote in an investor note.

Meanwhile, negotiations over a post-Brexit trade deal between the EU and the UK continue this week, with only six weeks left until the current transition period ends.

Market players hope that an agreement will be reached, even if it is a rather basic one that would leave some discussions for a later time.

“The FX market is seeing it as a GBP positive sign that the negotiations are being continued in December,” Ulrich Leuchtmann, Forex strategist at Commerzbank, was quoted as saying by Reuters.

Leuchtmann also said that an extension to the December 31st transition period deadline now seemed likely, since the negotiating sides are running out of time to strike a deal.

As of 10:23 GMT on Monday GBP/USD was gaining 0.65% to trade at 1.3369, after earlier touching an intraday high of 1.3381, or its strongest level since September 2nd (1.3403). The major pair has risen 3.28% so far in November, following another 0.26% gain in October.

In terms of economic calendar, today market players will be paying attention to the preliminary data on business conditions in US manufacturing and services sectors for November, due out at 14:45 GMT.

Additionally, several Federal Reserve officials are expected to make speeches.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 19.5 basis points (0.195%) as of 9:15 GMT on Monday, down from 21.1 basis points on November 20th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3273
R1 – 1.3308
R2 – 1.3333
R3 – 1.3368
R4 – 1.3403

S1 – 1.3248
S2 – 1.3213
S3 – 1.3189
S4 – 1.3164

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