The bid tone around the pound gathered pace last minutes, taking on the GBP/USD recovery further towards 1.3600 levels ahead of the BOE’s Financial Policy Committee (FPC) report release.
GBP/USD recovers over 1 big figure
The spot once again found solid support just ahead of 1.3450 levels, and from there embarked upon a robust 120-pips recovery mode, now gathering pace for a test of 1.36 handle.
The latest upmove in the major is mainly driven by a fresh round of selling seen in the EUR/GBP cross, as the European traders hit their desks and assess the implications of the German election fallout, with Merkel set to form a coalition government.
However, markets remain wary over the recovery, as uncertainty over Brexit continue to loom, especially after the UK PM May asked for a 2 year transition period during her speech in Florence last Friday.
"PM May's speech was conciliatory yet thin on details and is likely to receive a lukewarm response from the EU," noted James Knightley, Chief International Economist at ING.
Additionally, the GBP traders also seek clarity on the Brexit divorce terms, as the UK’s Brexit Secretary Davis heads for the fourth round of talks with chief EU negotiator Michel Barnier later this week.
In the meantime, the spot will take cues from the BOE FPC report and Fedspeaks for fresh momentum.
GBP/USD levels to consider
According to Karen Jones, Analyst at FXStreet, “GBP/USD eased back from critical medium term resistance at 1.3600/70, which represents a double Fibo and the 2014-2017 downtrend. Given the convergence of resistance here we would expect this to continue to hold the initial test and provoke some profit taking. However currently the intraday Elliott wave counts are positive. In order to alleviate immediate upside pressure the market will need to fall sub 1.3267 (August high).”
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