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Sterling hovered above $1.33 as traders clung to hopes that Britain and the European Union would soon seal a long-awaited Brexit trade deal, even as the clock ticked down on the Brexit transition period.

The United Kingdom exits the EU’s orbit on Dec. 31 and both sides are demanding concessions from the other on fishing, state aid and how to resolve any future disputes before agreeing a deal to govern their trading relationship from Jan. 1.

Britain and the European Union are running out of time to clinch a Brexit trade deal but if good progress is made this week then the talks could be extended, Environment Secretary George Eustice said this morning.

Talks between EU chief negotiator Michel Barnier and British chief negotiator David Frost continued Sunday. British Foreign Secretary Dominic Raab said it was a very significant week for Brexit.

Despite the failure to reach agreement so far, most sterling investors are confident the two sides will eventually come around – the pound has held on to recent gains and last week hit a 2-1/2 month high.

The UK is likely to face adjustment pressures from the twin factors of COVID-19 and Brexit with or without a limited FTA (Free Trade Agreement) in place from January 1, 2021, and there is scope for more friction in the bilateral UK/EU relationship going forward.

COVID-19 infections have fallen by 30% during England’s month-long national lockdown and the virus is now in retreat, a large-scale study of more than 100,000 volunteers showed.

England began its second national lockdown on Nov. 5 to curb rapidly rising infections and protect its health system. The country is due to return to a regional approach to restrictions from Dec. 2.

Levels of infection fell 30%, with 96 people per 10,000 infected between Nov. 13 and Nov. 24, according to interim results of the study by Imperial College London and Ipsos MORI.

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