GBP/USD testing offers near 1.3500 as Brexit concerns intensify

GBP/USD appears to pause its recovery from two-month lows of 1.3424 in early Asian dealings on Monday, as Brexit concerns are seen returning, spoiling the party for the GBP trading.

Brexit woes back in play

The 1.3500 remains a tough nut to crack for the GBP bulls, as the Irish Foreign Minister Simon Coveney warned against the UK government’s readiness to trigger Article 16 of Northern Ireland. Coveney said that doing so could lead to a trade dispute between the European Union (EU) and the Kingdom.

Further, the Bank of England’s (BOE) status-quo on the interest rates decision last week combined with Governor Andrew Bailey's cautious stance will continue to remain a weight on the major, despite the recent pullback in the US dollar across the board.

On Friday, the US dollar corrected sharply from the yearly highs against its major peers, tracking the sell-off in the Treasury yields, as investors reassessed the Fed’s tightening bets after Chair Jerome Powell said that they are patient on the rate hike last Wednesday.

However, with the Brexit woes back, GBP/USD’s recovery is likely to remain at risk, with Bailey’s speech and Fedspeak awaited later on Monday.\

Separately, the much-trumpeted free trade agreements (FTAs) “barely scratch the surface of the UK’s challenge to make up the GDP lost by leaving the EU”, according to an analysis commissioned by The Independent from top academics at the University of Sussex UK Trade Policy Observatory.

GBP/USD: Additional levels to consider