GBP/USD pares losses and returns above 1.2600

• GBP/USD finds support at 1.2500 to return to levels past 1.2600.
• The pound shrugs off previous weakness as the USD loses momentum.
• GBP will drop to 1.2300 if Brexit transition is not extended – Reuters Poll.

The pound sterling is picking up during Thursday’s US session. GBP has taken advantage of a softer US dollar to extend its rebound from 1.2500 lows to session highs beyond 1.2600, approaching an important resistance area at 1.2650.

Pound rally stalled at 1.2600 amid growing Brexit fears

The GBP/USD has rallied about 3.5% from 1.2170 lows on late May, with the US dollar losing ground amid an improved market mood on hopes of a fast global economic recovery. The pair, however, retreated on Wednesday as risk appetite lost steam with the investors growing wary about the lack of progress on the Brexit talks.

The pair's reversal from two-month highs at 1.2615 has been contained at 1.2500, and the GBP pared losses on Thursday, with the dollar losing ground after the ECB’s decision to step up the COVID-19 emergency fund.

GBP/USD might fall to 1.2300 without Brexit transition extension – Reuters Poll

According to the latest Reuters poll of FX strategists, the pound will give away recent gains against the USD if the UK fails to extend the Brexit transition period, “The pound is expected to have weakened to $1.23 by end-June week.”