GBP/USD eyes 1.2900, Brexit brinkmanship, BOE’s Bailey in the spotlight

GBP/USD keeps buyers hopeful, despite the US dollar’s recent recoveries, while taking rounds to 1.2860 during the pre-London open trading on Tuesday. In doing so, the Cable extends the previous day’s gains, mainly due to the Brexit-positive headlines, but stays challenged ahead of the crucial departure talks in Brussels.

With headlines from The Times suggesting the European Union’s (EU) softer stand on Brexit, Pound bulls could ignore The Financial Times (FT) news suggesting hardships for UK Chancellor Rishi Sunak.

The bloc not only shows readiness to alter the legal statement, while taking clues from Britain, but also drops the previous tone of warnings. The news also ignores the UK Cabinet Minister Michel Gove’s rejection to remove the clauses in the Internal Market Bill (IMB) that confront the Brexit Withdrawal Agreement (WAB).

On the other hand, the FT piece relies on the comments from the Institute for Fiscal Studies (IFS) that highlight the risk of failing on the Tory manifesto promises without raising taxes or huge borrowing.

It should be noted that the BOE’s Deputy Governor Sir Dave Ramsden mentioned, as per Reuters, “At present, negative policy rates would be less effective as a tool to stimulate the economy." Should the BOE Governor, Andrew Bailey, drop his recently bearish bias at the Chief Executives’ Club at Queen’s, GBP/USD bulls will have an additional reason to cheer.

Positives aren’t only confined to the UK as the US Democrats’ readiness to alter the demands over the coronavirus (COVID-19) aid package also favor the market’s risk-tone sentiment and helps the US dollar index (USDX) to recover Monday’s losses.

Looking forward, the Brexit teams of the UK and the EU, led by David Frost and Michael Barmier respectively, will meet in Brussels today. The departure negotiations were last stuck over the IMB and hence the same will become an important issue. However, talks concerning fisheries, level playing field also can trigger the British anger the call back the guys, which in turn will harm the GBP/USD prices.

It’s worth mentioning that the first round of US President Election debate is likely to use American President Donald Trump’s tax payments as a fresh issue and may challenge the US dollar run-up. Additionally, a slew of the second-tier Fed policymakers are also up for speaking and may entertain the momentum traders.

Technical analysis

The pair’s ability to cross the 100-day EMA, currently near 1.2830, directs the bulls towards 1.2910/20 resistance confluence comprising 21-day and 50-day EMA.