GBP/USD plummets to lows, risks breaking below 1.29 handle ahead of UK Cabinet meeting

   •  Overnight Brexit optimism quickly fades away and prompts some fresh selling.
   •  Softer US consumer inflation figures further dents sentiment around the GBP.
   •  Today’s key focus will be on the UK Cabinet meeting on the draft Brexit deal.

The GBP/USD pair extended its intraday retracement slide and has now moved on the verge of breaking below the 1.2900 handle. 

After yesterday's strong upsurge and a subsequent retracement from highs, the pair regained positive traction during the Asian session on Wednesday and touched an intraday high level of 1.3035. The positive momentum, however, started losing steam in wake of critical comments from the UK PM Theresa May’s coalition partner - the conservative Northern Irish DUP. 

Comments by various DUP parliamentary members clearly indicated that the draft deal is unlikely to find acceptance and will be voted down in the Parliament, which was eventually seen exerting some downward pressure through the mid-European trading session on Wednesday. 

Against the backdrop of persistent Brexit uncertainties, the British Pound was further weighed down by today's softer-than-expected UK consumer inflation figures, coming in to show that the headline CPI rose 0.1% m/m in October and 2.4% y/y. 

Adding to this, possibilities of some fresh technical selling on a sustained weakness below 100-hour SMA support, coupled with a goodish pickup in the US Dollar demand further collaborated towards accelerating the pair's downward momentum over the past hour or so. 

Today's key focus will be on the crucial UK Cabinet meeting on the Brexit deal, scheduled later today at 1400 GMT. Ahead of the big event risk, Irish PM Leo Varadkar will address parliament at 1200 GMT and also influence the sentiment surrounding the British Pound.

Meanwhile, the release of the latest US consumer inflation data, due for release during the early North-American session, seems more likely to be overshadowed by the incoming Brexit-related headlines and might fail to produce any meaningful trading opportunities.

Technical levels to watch

On a sustained weakness below the 1.2900 handle, the pair is likely to accelerate the fall back towards the 1.2850-45 horizontal support before eventually dropping to challenge the 1.2800 round figure mark. On the flip side, the 1.2970-75 region now becomes an immediate resistance, which if cleared might lift the pair back beyond the key 1.30 psychological mark.