- GBP/USD witnessed some follow-through selling for the second consecutive session on Thursday.
- Brexit uncertainties, softer-than-expected UK macro data continued undermining the British pound.
- The emergence of some fresh USD selling failed to impress bulls or lend any support to the major.
The GBP/USD pair continued losing ground through the mid-European session and dropped to three-day lows, around the 1.3145 region in the last hour.
The pair extended the previous day’s retracement slide from two-month tops – levels beyond the 1.3300 mark – and witnessed some follow-through selling for the second consecutive session on Thursday. The downfall was exclusively sponsored by a shift in the sentiment surrounding the British pound amid growing market anxiety over a Brexit deal.
An Irish minister confirmed on Wednesday that negotiators are unlikely to reach an agreement this week and set to miss their mid-November deadline. Investors turned cautious on the back of the delay and opted to lighten their GBP bullish bets, which, in turn, was seen as one of the key factors exerting some pressure on the GBP/USD pair.
It is worth mentioning here that a deal must be agreed by leaders by November for the EU parliament to pass it into legislation by the end of the transition period on December 31. This adds to the pressure on negotiators to make enough progress on key sticking points – the so-called level playing field, fisheries and state-aid rules – before the European Council summit next.
The sterling was further pressured by Thursday’s softer-than-expected UK macro data, showing that the economy expanded by 1.1% in September and 15.5% during the third quarter of 2020. The readings were below consensus estimates pointing to a growth of 1.5% MoM and 15.8% QoQ. Adding to this, the UK Industrial and Manufacturing Production also fell short of market expectations.
Meanwhile, the emergence of some selling around the US dollar did little to lend any support to the GBP/USD pair. Concerns about the continuous surge in new coronavirus cases in the United States revived hopes for additional stimulus. This, along with a steep decline in the US Treasury bond yields, further undermined the USD demand.
Market participants now look forward to the US economic docket, highlighting the release of the latest consumer inflation figures for October and Initial weekly Jobless Claims. The data might influence the USD price dynamics and produce some short-term trading opportunities ahead of the Fed Chair Jerome Powell’s scheduled speech later during the US session.
Technical levels to watch
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