- GBP/USD fails to bounce up past 1.2937 and retreats to 1.2900 area
- Pound dives as hopes of a Brexit deal deteriorate.
- Westpac sees the GBP/USD trapped between 1.27 and 1.32.
The sterling is looking heavy on Thursday as previous hopes of a Brexit deal with the EU deteriorate. The GBP/USD has depreciated approximately 1% on the day and is testing 1.2900 at the moment of writing.
Brexit deal obstacles hurt the pound
The pound has relinquished Wednesday’s gains against the US dollar as the investors reassess the chances of significant achievements in the Brexit negotiations. With the obstacles between the UK and the EU becoming more evident, namely the differences about fisheries and fair competition and dispute resolution issues, the market starts to anticipate a watered-down-agreement, in case there is any.
Beyond that, the USD has been boosted across the board in a general rush for safety. Investors’ disappointment regarding the remote chances of a fiscal stimulus in the US and the growing concerns about the economic impact of tighter restrictions to curb the second coronavirus wave have crushed appetite for risk, boosting demand for safe-havens like the US dollar and the yen.
GBP/USD: Trapped between 1.27 and 1.32 – Westpac
On a technical level, the Westpac FX analysis team sees the GBP/USD trading back and forth between 1.27 and 1.32: “This week’s EC summit may not find a breakthrough but it may allow for more intense talks on details to begin and so lead to a potential agreement over the coming month. However, uncertainty remains high (…) Within progress on post-Brexit trade or COVID-19 cases, GBP/USD will be range-bound (1.27-1.32).”
Technical levels to watch
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