GBP/USD clings to modest gains above mid-1.3400s, lacks follow-through

The GBP/USD pair quickly reversed an early European session dip to the 1.3430 region and has now moved back to the top end of its daily trading range.

Following the previous day's pullback from the key 1.3500 psychological mark, or fresh YTD tops, the pair witnessed a modest pullback on the last trading day of the week amid persistent Brexit uncertainties. In the latest Brexit-related headlines, the French Junior European Affairs secretary Clément Beaune said there is a risk there will not be a Brexit deal and added that they would veto any deal that is deemed unsatisfactory.

This comes on the back of a sudden step back in negotiations on Thursday after British officials said that the European Union had turned up with a new set of demands. The apparent eleventh-hour hardening of the EU position was seen as one of the key factors that exerted some pressure on the GBP/USD pair. That said, investors still seem convinced about the possibility of a last-minute Brexit deal, which helped limit any meaningful slide.

The GBP/USD pair was last seen hovering near the 1.3465 region, just a few pips below session tops and was further supported by the prevalent bearish sentiment surrounding the US dollar. The optimism over the rollout of a vaccine for the highly contagious coronavirus disease, along with increasing bets for more US fiscal stimulus and further policy easing by the Fed, kept the USD bulls on the defensive through the first half of the trading action on Friday.

Meanwhile, the upside seems limited as investors might prefer to stay on the sidelines and wait for fresh Brexit updates. Traders might also refrain from placing aggressive directional bets ahead of Friday's release of the closely-watched US monthly jobs report – popularly known as NFP. Hence, any subsequent move up is more likely to meet with some fresh supply and remain capped, at least for the time being.

Technical levels to watch