GBP/USD battles 1.2900 ahead of UK PM Johnson's Brexit approach
- GBP/USD stretches Thursday’s bearish move, up for first negative week in last three.
- UK-EU ready to discuss Brexit even as October deadline expired, UK PM Johnson to discuss handling, future path of negotiation.
- London will witness tough lockdown measures from mid-Friday, resulting in activity restrictions in half of the UK.
- US policymakers keep jostling over stimulus, American consumer-centric data to decorate the calendar.
GBP/USD drops to 1.2894, down 0.15% intraday, while heading into Friday’s London open. In doing so, the sterling keeps the previous day’s downbeat performance amid Brexit and the coronavirus (COVID-19) woes ahead of UK PM Boris Johnson’s speech. Also weighing the quote could be the US dollar’s safe-haven demand backed by increasing odds of no stimulus ahead of presidential elections.
BoJo to keep the show on…
The previously hailed October 15 deadline for Brexit talks passed without any deal, as widely anticipated, with the European Union (EU) and the UK policymakers showing readiness to extend talks. EU’s chief negotiator Michael Barnier said he is ready for Brexit talks "until last possible day" whereas his British counterpart blamed the regional leaders for the current deadlock.
With no chatters over closing the departure talks, macro forecasts favor UK PM Johnson to strike a bit softer tone while accepting the EU authority. Although the Tory leader isn’t likely to relinquish controls over fisheries, the bloc’s demand for a “level playing field” may be considered with a tailor-made approach. Identifying this, Goldman Sachs said, as per Reuters, “There could be drama at the EU summit over Brexit but that a thin Brexit trade deal was likely to strike by early November.”
The COVID-19 conditions are getting worst with daily counts reaching closer to the 20,000 threshold, 18,980 new cases, 138 deaths marked in the latest report published on Thursday. On the other hand, “US cases of the novel coronavirus crossed 8 million on Thursday, rising by 1 million in less than a month, as another surge in cases hits the nation at the onset of cooler weather,” said Reuters.
The pandemic has already recalled tough local lockdowns in Spain, France, Germany and northern England. Though, the latest of Manchester makes, coupled with Friday’s start of lockdown in London, will result in half of Britain off due to the deadly virus.
Other than the Brexit and virus, the American Congress’s inability to provide the much-needed stimulus also weighs on the risk-tone. In the latest update during the “town hall” style question and answer session, US President Donald Trump tried to renew hopes of a stimulus before the election but failed. The same efforts were done earlier by US House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell.
Even so, futures for the FTSE 100 stay mildly positive whereas S&P 500 Futures await fresh clues after snapping a three-day losing streak earlier in Asia.
Moving on, US Retail Sales for September and Michigan Consumer Sentiment Index for October will decorate today’s economic calendar. However, the key will be the Tory leaders’ speech and stimulus talks. Given the likelihood of BoJo’s soft tone, GBP/USD may trim weekly losses.
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Technical analysis
An ascending trend line from September 30, currently around 1.2890, offers immediate strong support ahead of the week’s bottom surrounding 1.2860. Alternatively, any recoveries below a horizontal trend line from October 6, at 1.3000 now, can be considered ephemeral. Though, intermediate bounces to 1.2945/50 can’t be ruled out.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
