- GBP/USD witnessed some heavy selling on Thursday and reversed the overnight positive move.
- The introduction of new coronavirus restrictions weighed on the sterling and exerted pressure.
- The risk-off mood benefitted the safe-haven USD and further contributed to the offered tone.
The GBP/USD pair maintained its heavily offered tone through the mid-European session and refreshed daily lows in the last hour, albeit managed to find some support ahead of the 1.2900 mark.
The pair struggled to capitalize on the previous day’s strong intraday bounce from one-week lows, triggered by reports that the UK will extend Brexit talks with the EU beyond this week. The draft from the EU summit conclusions, as reported by Reuters, also indicated that the EU leaders will authorize continuation of negotiations with Britain on a trade deal in coming weeks.
The British pound, however, failed to gain any meaningful traction and was being pressured by the introduction of new coronavirus restrictions. In fact, the UK health secretary, Matt Hancock confirmed that London will switch to Tier 2 of the lockdown system. This comes amid a fresh leg down in the equity markets, which benefitted the US dollar’s safe-haven status.
The global risk sentiment took a hit on the back of fading hopes of additional US fiscal stimulus measures before the upcoming US presidential election on November 3. Moreover, a rapid rise in new coronavirus infections in Europe further weighed on investors’ sentiment and drove flows towards traditional safe-haven currencies.
Apart from this, possibilities of some short-term trading stops being triggered on a sustained break below 200-hour SMA, around the 1.2970-65 region, exerted some additional pressure. The GBP/USD pair has now reversed the previous day’s positive move, with bearish traders now eyeing a sustained weakness below the 1.2900 mark before placing fresh bets.
Technical levels to watch
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