GBP/USD perched on the pivot awaiting Brexit showdown

GBP/USD was perky into the year-end, rallying from 1.2681 to a high of 1.2814 on the back of comments made by Foreign Minister Hunt. Bulls latched on to his suggestion that May's deal could pass the Parliament if the EU provides clarification that the Irish backstop will be temporal. Also, senior Brexiteer minister Liam Fox said that there is a 50-50 chance the UK will not leave the EU on 29 March if MPs reject Theresa May's Brexit deal next month. Meanwhile, from the horse's mouth, PM May pledged to "turn a corner" if her deal gets approved, saying that once they solve this, they could focus on more relevant UK issues. 

Looking ahead, we move into the US nonfarm payrolls event at the end of the week, but on a domestic front, December Markit Manufacturing PMI will be out this Wednesday, expected at 52.5 vs. 53.1 in November. 

Nonfarm Payrolls outlook

"In the context of pessimistic market sentiment, we expect a payrolls rebound to 190k for December to be interpreted as slightly hawkish. Surveys published so far suggest payrolls likely remained firm, which should keep the unemployment rate unchanged at 3.7%. We also anticipate wages to rise 0.3% m/m, bringing the annual print slightly down to 3.0%," analysts at TD Securities explained.

GBP/USD levels

Valeria Bednarik, Chief Analyst at FXstreet notes that the 4 hours chart for the pair shows that the pair broke and held above the 200 EMA, for the first time above it since early November:

"In the same chart, the 20 SMA turned modestly higher, some 200 pips below the current level, while technical indicators barely retreated from overbought levels before stabilizing, somehow suggesting a limited downward potential. Nevertheless, Brexit uncertainty will play against the Pound, despite broad dollar's weakness, and advances will likely be seen as selling opportunities."