- GBP/USD is trading back below 1.3150 and is an underperformer amongst the G10 currencies.
- Contributing to GBP weakness is concerns over the ongoing Brexit impasse, weak economic data and relations with China.
GBP/USD is one of the underperforming USD major pairs today, currently trading back at lows of the day in the 1.3140s, down around 80 pips or 0.6%.
Brexit, economy, concerns over China relations weighing
A few negative fundamental factors have contributed to GBP/USD’s largely downbeat performance today. Firstly, this morning’s batch of economic data was underwhelming; the preliminary estimate of Q3 GDP growth showed a strong rebound of 15.5% on the quarter (a little below expectations for a rebound of 15.8%). However, September MoM GDP growth data was weak (at 1.1% versus expectations for 1.5%), as was September Industrial and Manufacturing Production.
Giving the GBP bears further impetus this morning was the news the UK had declared a new law in Hong Kong that permits the disqualification of elected officials over national security concerns a breach of the China-UK Joint Declaration. UK Foreign Minister this morning said that “China has once again broken its promises and undermined Hong Kong’s high degree of autonomy”; relations between the UK and one of its most important global trading partners, China, are once again looking strained.
Perhaps exerting the greatest negative effect on GBP on Thursday, however, is further evidence of gridlock in trade talks between the UK and EU. Most recently, reports emerged that EU diplomats are sounding more pessimistic on the state of talks, with one quoted as saying “two weeks ago it seemed more positive. Now the only thing that’s moving is time.” This follows reports on Wednesday that the EU and UK are likely to miss their self-imposed deadline for a deal of 15 November 2020.
Comments from the Governor of the Bank of England Andrew Bailey that the UK is not looking at a policy of yield curve control and reports that UK Chancellor of the Exchequer Rishi Sunak is considering new measures to kickstart the economy next year have so far failed to inspire much of a recovery.
GBP/USD eyeing a retest of 1.3100
Since breaking below support at the 1.3175 level (the 21 October 2020 high), GBP/USD looks vulnerable to further losses, given a lack of notable levels of support ahead of the psychological 1.3100 level. Below that, the 21-day moving average at 1.3040 offers the next area of support.
GBP/USD additional levels
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