GBP/USD prints daily highs above 1.3380 as US dollar slumps


  • GBP/USD trades just below highs of the day in the 1.3380s, as month-end flows hurt USD.
  • Sterling’s rally comes despite continued deadlock in Brexit negotiations.

GBP/USD has moved back towards the top of its recent 1.3300-1.3400 range, buoyed by broad USD weakness that has seen the Dollar Index (DXY) slump to fresh lows of the year in the 91.50s. GBP/USD currently trades in the 1.3370s, up around 70 pips higher or with gains of over 0.5%.

GBP immune to continued Brexit deadlock

Pound sterling remains largely immune to negative Brexit headlines. GBP is one of the best performing G10 currencies on Monday, despite mixed/negative news flow on the state of talks over the weekend. An EU source reportedly said that EU/UK talks over the weekend in London were difficult and "massive divergences" remain on the three main areas. UK and EU officials have confirmed that differences between the two sides persist.

With GBP/USD close to multi-month highs, markets appear to place a high probability that a deal will be reached in the coming days, thus leaving the currency highly vulnerable to disappointment (i.e. if talks were collapse). However, despite continued gridlock in negotiations and no end to the impasse in sight just yet, most analysts do still a deal to be reached at some point prior to the end of the year, given just how strongly it is in the interest of both the UK and EU to get a deal done as both regions struggle to prop up their economies amid the Covid-19 pandemic.

Elsewhere, comments from Bank of England Monetary Policy Committee member Tenreyro largely went under the radar, as did UK lending data (Mortgage approvals beat expectations but Net Lending to Individuals and M4 Money Supply were soft). Looking ahead for GBP, aside from the key theme of Brexit this week’s calendar is looking quite sparse.

USD slumps amid month-end flows

Negative US dollar month-end flows appear to be one factor driving the buck lower on Monday; a number of bank models flagged a relatively strong sell signal for USD vs the rest of the G10 currencies aside from JPY.

More broadly, various other market narratives continue to keep USD suppressed; the path of the Covid-19 pandemic in the US is looking increasingly unfavourable vs the Eurozone and other parts of the world. Combine that with the fact that the current lame-duck Congress is unlikely to be able to deliver another much-needed stimulus package and Fed action in December is looking increasingly likely. Officials and the recently released minutes of the November meeting already hinted at tweaks to the bank’s QE programme if economic conditions continue to worsen.

Analysts note that the threat of Fed action undermines the safe-haven appeal of USD compared to JPY and CHF, whose respective central banks are maxed out, policy-wise. Meanwhile, vaccine optimism and growing hope for the post-pandemic global economic recovery, that ought to be hastened by the better global trade environment fostered by a Biden presidency, has been weighing on havens such as USD more broadly.

GBP/USD moves back into the top half of recent range

GBP/USD has made decent strides to the upside on Monday, the pair thus recovering back into the upper half of its recent approximate 1.3300-1.3400 range. If recent USD weakness continues, it seems plausible that the pair would be able to break the top of this range, even in absence of a Brexit deal (for trading the theme of Brexit, EUR/GBP is arguably the more appropriate instrument to look at).

Such a break would open up the door for a run at 1.3450 and then onto 1.3500 and the year-to-date high at 1.3516 just above it.

If the recent USD downside proves more short-term, with the bulls perhaps picking up again after a day of dollar negative month-end flows, GBP/USD might well turn lower again, but faces stiff support between 1.3290-1.3310. Below that, last Monday’s low sits in the 1.3260s ahead of the 21-day moving average just above the psychological 1.3200 level.

GBP/USD one hour chart

gbpusd

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 

EUR/USD News

GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 

GBP/USD News

Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News

Forex MAJORS

Cryptocurrencies

Signatures