GBP/USD: Rising COVID-19 risks put a dampener on Brexit deal optimism – MUFG

FXStreet reports that Brexit deal optimism is helping to lift the GBP/USD pair back towards the 1.3000-level. However, the sharp rise in UK COVID-19 cases is set to trigger renewed restrictions, dampening the good mood, as per MUFG Bank. 

“Bloomberg has reported that in private, officials are more upbeat over the likelihood of reaching a trade deal despite the UK government’s continued public threats to walk away from talks if a deal is not reached by the 15th October while the EU has dared Boris Johnson to walk away if he views a deal as impossible. The upcoming EU Summit on 15th and 16th October is viewed as more of a ‘stock-taking exercise’ which won’t get in the way of negotiations.”

“The improving mood music surrounding the Brexit talks is encouraging a stronger pound. However, the upside potential for the pound from Brexit developments is being dampened by negative COVID-19 developments in the UK. The sharp rise in COVID-19 cases particularly in the North of England and London is increasing the risk of tighter restrictions being re-imposed in the coming weeks and months that could deliver a more significant setback to the economic recovery.”