GBP/USD: Mildly bid ahead of UK PMI, trade/Brexit headlines in play

  • GBP/USD stays mostly positive amid receding threats of no-deal Brexit.
  • Tories lead in early-election polls, risk-on stays on the cards.
  • UK Construction PMI, US factory Orders to decorate economic calendar.

With the increasing odds of a Tory leadership post-December election, GBP/USD holds on to recovery gains while taking the bids to 1.2940 ahead of Monday’s London open.

Be it YouGov, Ipsos or Deltapoll, all of them suggest a clear lead of the Tory leader Boris Johnson over other the main opposition Labour Party ahead of the general election on December 12th, as per Reuters. However, the United Kingdom’s (UK) Prime Minister (PM) still seems skeptic of them as the Times mentions that the UK PM Johnson will remove threat of no-deal Brexit from Conservative party manifesto.

On the other hand, news concerning the US-China trade deal has been mixed as the United States’ (US) President Donald Trump’s optimism surrounding the phase one deal fail to conquer the Commerce Secretary Wilbur Ross’s doubts over any further relationships.

Also adding to the market’s lack of risk-on could be the US President’s absence at the weekend’s the Association of Southeast Asian Nations (ASEAN) summit in Thailand, the second one in a row. However, this could be mitigated by the latest news from Reuters that quotes President Trump’s envoy while conveying that US President Trump invites Southeast Asian leaders to visit US for a special summit.

Even so, market sentiment has been choppy since the start amid a lack of major data/event and Japan’s off.

Moving on, investors will be concentrating mainly on the trade/Brexit headlines while also keeping an eye over October Markit Construction Purchasing Managers Index (PMI) from the UK and the US Factory Orders for September. Market consensus favors an upbeat print of 44.00 versus 43.3 from the British PMI while also expecting the US statistics to decline further to -0.3% from -0.1% prior.

Technical Analysis

Prices keep being positive unless closing below  61.8% Fibonacci retracement level of March-September downpour, at 1.2842, a break of which can fetch prices to 1.2790/80 support confluence including 21-day Simple Moving Average (SMA), late-June high and the late-October low. On the upside, a downward sloping trend line since September, at 1.3000, holds the key to pair’s rise to the previous month high close to 1.3015 and then to 1.3100 round-figure.

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