- A combination of factors prompted aggressive short-covering move around GBP/USD.
- Hopes for US fiscal stimulus boosted risk sentiment and undermined the safe-haven USD.
- Barnier’s comments provided an additional boost to the sterling and remained supportive.
The British pound caught some aggressive bids during the early European session, pushing the GBP/USD pair to one-week tops, around the 1.3065 region.
Following the previous day’s two-way price move, the pair managed to regain some positive traction on Wednesday and was being supported by the prevalent selling bias surrounding the US dollar. The latest optimism about additional US fiscal stimulus measures remained supportive of the upbeat market mood, which, in turn, undermined the greenback’s relative safe-haven status against its British pound.
Apart from a broad-based USD weakness, the GBP/USD pair got an additional boost following the EU chief Brexit negotiator, Michel Barnier’s comments, saying that a Brexit agreement is within reach. Barnier also showed readiness to discuss all subjects based on the legal text and raised prospects for the resumption of Brexit talks. This, in turn, prompted aggressive short-covering around the sterling.
Meanwhile, the latest leg of a sudden spike over the past hour or so could also be attributed to some technical buying above the key 1.3000 psychological mark. A subsequent strength beyond a one-week-old descending trend-line resistance, around the 1.3015-20 region, also seemed to have collaborated to the strong move up and might have already set the stage for a further intraday appreciating move.
With the incoming Brexit-related headlines acting as an exclusive driver of the sentiment surrounding the British pound, the GBP/USD pair had a rather muted reaction to Wednesday’s UK consumer inflation figures.
Technical levels to watch
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