GBP/USD rallies towards 1.3400 pre-London fix, shrugs off downbeat Brexit updates

• GBP/USD has rallied in recent trade as the London fix approaches, despite a lack of progress in Brexit talks.
• The pair has pushed to fresh highs of the day above 1.3380 and is eyeing a test of 1.3400.  

GBP immune to negative sounding Brexit reports for now, benefits from pre-London Fix flows

Updates on the state of Brexit negotiations on Friday have not been good. French Foreign Minister Jean-Yves Le Drian recently commented that British overtures in Brexit talks remain insufficient. Moreover, he accused the UK of slowing talks over secondary subjects and playing with the calendar and urged fisheries will not be the “adjustment” variable in the talks.

Elsewhere, BBC reporter Katya Adler tweeted that, according to EU sources, there were doubts about EU Brexit Negotiator Michelle Barnie going to London to negotiate once he leaves quarantine on Friday, and that talks have not been going well.

These latest updates follow comments from the President of the European Commission von der Leyen, who said on Wednesday morning that she cannot say if there will be a deal and the next few days would be decisive.

But the lack of progress towards a deal is yet to dent sentiment towards GBP, with GBP/USD rallying back towards Wednesday morning and Tuesday highs around 1.3380.

Clearly, Wednesday’s Brexit news has done little to dent expectations that the two sides will eventually reach a deal on key sticking points. Just a little more brinkmanship to get through before the deal is reached seems to be the view of the market.

Looking ahead, any updates from UK sources as to how talks are going, or perhaps a response to comments from the French Foreign Minister, will be of note.

In terms of recent price action; GBP seems to be benefitting from pre-London Fix flows; Wednesday’s 4 pm London fix is essentially being seen as the final fix of the month, given that volumes are expected to be thin on Thursday, Friday and next Monday due to US participants taking time off to enjoy Thanksgiving celebrations.

GBP/USD eyes a retest of multi-month highs

With GBP/USD having rallied back above 1.3380 and seemingly immune to downbeat Brexit updates for now, the door seems wide open for a test of this week’s highs at just below 1.3400. A break of this level would take cable back to levels not seen since early September.

If recent upside is reversed by either a pick up in USD or an increase in Brexit pessimism, support levels of note include Wednesday’s and Tuesday’s lows on either side of the 1.3300 level, followed by Monday’s low at 1.3266.