GBP/USD falters ahead of 1.3400 mark, drifts into negative territory

The GBP/USD pair quickly retreated around 50 pips during the early European session and refreshed daily lows, around the 1.3355-50 region in the last hour.

The pair continued with its struggle to clear a key hurdle near the 1.3400 round-figure mark and witnessed a modest intraday pullback on Thursday amid persistent Brexit-related uncertainties. In the latest Brexit-related headlines, British finance minister, Rishi Sunak said that negotiations are still ongoing and that he remains hopeful that a deal can be reached.

The comments, however, did little to impress bullish traders in absence of a significant breakthrough on key sticking points – the so-called level playing field, fisheries and state-aid rules. It is worth reporting that the European Commission president, Ursula van der Leyden on Wednesday said that the disagreement over access to Britain's fishing waters continues to block progress.

Separately, British Prime Minister Boris Johnson reiterated that the UK's position on fisheries hasn't changed and that they will not ask for additional time to negotiate the trade deal with the European Union. With very little time left before the Brexit transition periods end on December 31, the deadlock turned out to be a key factor that capped the upside for the GBP/USD pair.

Despite Brexit anxieties, the downside remains cushioned, at least for the time being, amid the latest optimism over a potential vaccine for the highly contagious coronavirus disease. This, along with a subdued US dollar demand, extended some additional support to the GBP/USD pair. The USD fell to its lowest level in more than two months amid speculations for additional easing by the Fed.

Data released on Wednesday showed an unexpected jump in the Initial Weekly Jobless Claims, suggesting that the imposition of new COVID-19 restrictions was undermining the labor market recovery. Adding to this, the minutes of the November 4-5 FOMC meeting revealed that policymakers debated a range of options to tweak the bond-buying program to support the economic recovery.

Meanwhile, investors are likely to refrain from placing any aggressive bets, rather prefer to wait for fresh Brexit updates before positioning for any firm direction. Moreover, relatively thin liquidity conditions on the back of the Thanksgiving holiday in the US leaves the pair at the mercy of the incoming Brexit headlines amid absent market-moving economic releases.

Technical levels to watch