GBP/USD extends recovery towards 1.3400 amid Brexit drama

GBP/USD gathers pace to take on the recovery above 1.3400 heading into the London open, as the market shrug-off looming Brexit concerns amid persistent US dollar weakness.

The greenback continues to bear the brunt of the increased demand for riskier assets, as optimism over the coronavirus vaccine and US fiscal stimulus continue to play out.

The UK’s medical regulator approved Pfizer’s covid vaccine on Wednesday, which will be available from next week. Meanwhile, the US Congress showed its willingness to discuss a much-larger fiscal aid package, adding to the prospects of a quick economic recovery.

The overall market optimism overshadowed the ongoing Brexit developments, as the cable staged a solid comeback from slump to 1.3289 reached in the US last session after the EU’s Chief Brexit Negotiator Michel Barnier warned that ‘a deal hangs in the balance.’

Differences continue to persist over the key sensitive issue of access to the fishing waters, although both sides continue carrying out intensive negotiations, with a deal likely to be reached this weekend. On the “level playing field” provisions, Barnier said the common ground was slowly being found.

With the Brexit headlines likely to be the main driver behind the pound’s moves, the US fiscal stimulus talks, vaccine updates and US economic data will also remain in focus.

GBP/USD technical levels