GBP/USD fails to hold above 1.29 as DXY continues to push higher

US Dollar Index rises above 95.30 in the NA session.
Brexit headlines provide a modest boost to the pound on Thursday.
Markets don't pay much attention to dismal PPI numbers.

Eren Sengezer FXStreet

After refreshing its lowest level in nearly a year at 1.2843, the GBP/USD recovered above the 1.29 mark on latest Brexit headlines but the greenback strength in the second half of the day forced the pair to retrace its gains. As of writing, the pair was trading at 1.2858, losing 0.18% on the day.

On Wednesday, reports of British PM Theresa May planning to have a meeting with her ministers to discuss how to prepare for a no-deal Brexit caused the pound to continue to weaken against its rivals. However, earlier today, Business Insider reported that the EU was considering a Brexit deal with the UK staying in the single markets while opting out for free movement of people and helped the GBP finally find some demand.

In the second half of the day, the data from the U.S. showed that the annual core-PPI eased to 2.7% in July from 2.8% in June. Although the initial market reaction to the data weighed on the greenback, it didn't take long for the US Dollar Index to gain traction. At the moment, the DXY is up 0.33% on the day at 95.40.

On Friday, investors will be focused on the Q2 GDP growth figures from the UK, which is expected to improve to 0.4% from 0.2% in the first quarter. A weaker-than-expected economic expansion in the UK is likely to weigh on the pound as it would confirm the BoE's cautious stance.

Technical outlook

The initial support for the pair is located at 1.2840 (daily low) ahead of 1.2770 (Aug. 24, 2017, low) and 1.2700 (psychological level/Jun. 26, 2017, low). On the upside, resistances could be seen at 1.2910 (daily high), 1.3000 (psychological level) and 1.3055 (20-DMA).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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