European session review: GBP continues to decline, as raised Brexit deal hopes cannot outweigh new Covid strain concerns

GBP declined against most of its major counterparts in the European session on Tuesday as increased hopes for a Brexit trade deal were not enough to outweigh concerns about a new coronavirus variant.

Reports that the UK's prime minister Boris Johnson and the European Commission's president Ursula von der Leyen held a phone call on Monday, trying to reach compromise in trade talks heightened hopes that the two sides could strike a deal before the end of the Brexit transition period on December 31. Politico's editor reported, citing an unnamed official familiar with the conversation, that the two leaders spoke about fresh proposals to resolve the existing stalemate on fisheries. But the UK's government official told Politico that the EU position was still miles off what was acceptable to them. Meanwhile, Reuters reported that EU sources said that the bloc was now willing to accept a reduction in the value of its catch in the UK waters of up to 25% over a period of time from 2021.

Investors remained concerned about a new COVID-19 strain in the UK, which had prompted stricter lockdown measures and restrictions on travel from the country. However, worries eased somewhat after the CEO of BioNTech (BNTX) Ugur Sahin stated that he was confident that his company's vaccine, developed with Pfizer (PFE), would work against the new UK variant. “We don’t know at the moment if our vaccine is also able to provide protection against this new variant,” he said. “But scientifically, it is highly likely that the immune response by this vaccine also can deal with the new virus variants.”