GBP/USD consolidates overnight strong gains to 2-week tops, just below mid-1.2400s

The GBP/USD pair was seen oscillating in a narrow trading band through the Asian session on Friday and consolidated the overnight upsurge to over two-week tops.
 
Having shown resilience below the 1.2200 round-figure mark, the pair on Thursday caught some aggressive bids and posted its largest daily percentage gains since March amid renewed Brexit optimism. The British Pound turned out to be the best-performing major currency after Irish Prime Minister Leo Varadkar said that a Brexit deal could be clinched by the end of October.

Sterling rallies on Brexit hopes

Following a three hour meeting with the UK PM Boris Johnson, Varadkar said that they have identified a potential path forward on the Irish border issue and how to avoid a hard border. The Irish border had caused a major impasse between Brexit negotiators and largely prevented the UK and EU from agreeing on a Brexit Withdrawal Agreement. The latest remarks, however, suggested that they might finally be able to find common ground and get Brexit talks back on track.
 
The pair rallied over 250 pips, taking along some short-term trading stops being placed near the 1.2300 handle and the 1.2345-50 supply zone, and was further supported by the prevalent US Dollar selling bias. Despite the incoming positive trade-related headlines and a strong pickup in the US Treasury bond yields, the Greenback failed to gain any respite and remained depressed in the wake of increasing odds of another interest rate cut by the Fed at its upcoming meeting on October 29-30.
 
Thursday’s softer US CPI figures further fueled market speculations and exerted some additional downward pressure on the buck. In fact, the headline US consumer price index (CPI) remained unchanged in September – the weakest reading in eight months – and held steady at 1.7% on an annual basis. Meanwhile, the core CPI rose by just 0.1% from the prior month, leaving room for a further monetary policy easing by the Fed.
 
The pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band, just below mid-1.2400s through the Asian session on Friday. Moving ahead, Friday's key focus will remain on the resumption of EU-UK Brexit talks and the incoming headlines might continue to act as an exclusive driver of the broader market sentiment surrounding the Sterling amid absent relevant market moving economic releases from the US.

Technical levels to watch