GBP/USD is free-falling after a new covid strain triggered flight bans to the UK. Developments around Britain's shuttering and the Brexit deadlock stand out, playing a significant role in moving the pound, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“Flight bans to and from the UK. European and non-European countries have acted rapidly – and arguably with panic – to prevent the spread of the new coronavirus strain. The VIU-202012/01 variant is responsible for the quick spread of the disease in London and Southeast England, causing Prime Minister Boris Johnson to announce new restrictions. However, there is no evidence that this mutation – which is normal with viruses – is more lethal nor vaccine-resistant. 

“Following the potential strain on British supply chains – just before Christmas, the PM convenes his Cobra cabinet used for emergency situations. Will he announce special measures to alleviate the pressure on British ports? Will other areas of the country enter severe lockdown levels? The PM's decisions could go both ways for the pound.” 

“Negotiators missed a toothless Sunday deadline set by the European parliament and deliberations continue in full force in Brussels. Are current disruptions due to the virus strain going to push the UK to concessions? That is yet to be seen. What is clearer, is that a Brexit breakthrough would lift the pound from the abyss.”

“Cable's downfall could have been worse had it not been for another deal across the pond. Democrats and Republicans resolved the main sticking points and are in the final throes of drafting a $900 billion stimulus deal. Investors expect the incoming Joe Biden administration to provide more federal support in early 2021.” 

“Support awaits at 1.3280, a swing low from last week, followed by 1.3225, a trough in early December. The monthly low awaits at 1.3135.   Some resistance awaits at 1.3325, which capped cable in mid-December. It is followed by 1.34, a top seen in November and where the 50 SMA hits the price.”