GBP/USD consolidates below 5-month tops, focus remains on key EU summit

The GBP/USD pair was seen oscillating in a narrow trading band through the Asian session on Thursday and consolidated the overnight positive move to five-month tops.
 
The pair on Wednesday quickly reversed an intraday dip to the 1.2655 region and surged through the 1.2800 handle to its highest level since mid-May amid a flurry of Brexit-related headlines. The initial leg down was triggered by not so optimistic comments by a UK official, saying that the government was downbeat on chances of a Brexit deal.

Brexit newsflow remains an exclusive driver

The British Pound was further weighed down by reports that suggested technical Brexit negotiations have reached an impasse and that the EU sees Brexit deal as impossible unless the UK moves. Wednesday's slight disappointment from the latest UK consumer inflation figures did little to influence the pair's intraday two-way price swings.
 
However, comments by French President Macron, saying that a Brexit agreement was being finalized, provided a much-needed respite to the GBP bulls. This was further reinforced by German Chancellor Angela Merkel, who said that Brexit talks are now in the final meters and provided an additional lift to the Sterling.
 
Meanwhile, reports that the main stumbling block to a deal has been removed and that the DUP has accepted the latest proposals on consent remained supportive. Adding to this, the prevalent US Dollar selling bias, amid firming Fed rate cut expectations, further collaborated to the pair's goodish intraday positive move of over 200 pips.
 
The pair eased a bit from daily tops and now seems to have entered a consolidation phase as investors refrained from placing any additional bullish bets ahead of the crucial European Council Summit, starting this Thursday, which will effectively determine whether the UK will leave the EU with a deal on October 31 or not.

Technical levels to watch