GBP/USD has been in decline in the North American session, falling from a test of the R1 level at 1.3239 from a high of 1.3249 and printed a recent low of 1.3183 as the FX space gets tarnished with the same brush as equities. Brexit hopes are still elevated and that should underpin the pound, although EUR/GBP is also bleeding with the greenback in retreat and EUR/USD supported in resistance territory, consolidating while the pound struggles on Thursday to keep up – However, bulls still have a hand in the game while holding above the 10 DMA at 1.3083. GBP/USD has enjoyed a series of days with positive Brexit headlines as we head towards the Euro Summit next week where on 17 October EU27 leaders will meet in the European Council (Art.50) to discuss Brexit – The October European Council will focus on migration and internal security on the 18th that will be followed by the Euro Summit in an inclusive format. “UK press reports that the UK and EU had agreed in principle to a backstop plan which PM May would ask her Brexit ministers to approve today. Essentially, the aim would be to keep the UK in a customs union after Brexit while trade talks progress. Details are short at this point and there still appears to be some significant gaps between the London and Brussels. A key issue is whether this plan would get through parliament – which is debatable,” analysts at Scotiabank explained. Fresh in-house Brexit jitters dent optimism However, a little wind was taken out of the pound’s sails on news that the Democratic Unionist Party has threatened to take serious action if it remains unhappy over the government’s Brexit plans and Theresa May relies on DUP support in key votes because she does not have a majority in the House of Commons. Sammy Wilson MP said the party was unhappy with what it had been hearing about the Brexit negotiations. Writing in Thursday’s Daily Telegraph, he said “briefings and leaks” suggested the UK might consider arrangements that could exclude Northern Ireland from the UK’s trade deals or lead to checks on goods arriving from Great Britain. In an article written by the BBC, speaking about the agriculture bill vote, Mr Wilson told BBC News: “It was a way of reminding the government that while our vote wasn’t important last night, it would be important sometime in the future, and we would have no hesitation withholding it if we thought that was a necessary sanction to impose.” He added: “If they (the government) decide to cave into the unreasonable and unnecessary demands which are being promoted by Brussels, then we will have to consider whether or not they have kept their side of the bargain.” “If they haven’t, there’ll be consequences, and one of the consequences is the votes that we have promised to deliver for their domestic legislation will not be forthcoming.” “The ball isn’t really in our court,” he further explained. “The government has to contemplate the consequences of giving in to the demands which are being made from Brussels at the minute.” It’s all global growth downgrades, the dollar and US yields Meanwhile, we had a massive ‘correction’ on Wall Street yesterday following IMF downgrades over world growth, Chinese market routs, prospects of real inflation and higher yields as the air escapes out of the bond market bubbles – moreover, there are whispers of recession coming across the airwaves when considering the spread between short and long-term US Treasury yields that have been flattening. As a consequence, the dollar’s bull’s stalwartness has started to fade with an unwind of speculative longs from upon the 95 handle in decline. That, at least, is good news for USD/CNH bears after IMF Lagarde urged China to keep moving toward a flexible yuan system with the pair moving as high as 6.9435 in Asia overnight as the CSI 300 crashes below the 3200 line in the sand and now tests the lowest levels since June 2016 – that’s really not going to be good for global growth sentiment going forward. For the meantime, at least, US yields are lower and the US CPI came in below expectations, as semi-relief to investors and pension funds on Wall Street, for now. However, it is still evident that many are on the sidelines awaiting further developments which are weighing on the greenback and supporting gold. The pound could find itself back in a bullish position depending on the outcome of next week’s EU summit and ongoing Brexit negotiations and knockout option round figure levels such as 1.3500 will attract bulls like ‘bears’ to honey when taking into account where the BoE might be placed with respect to inflationary pressures in the UK. However, anything that is not posting to a breakthrough between the EU and UK could be catastrophic for the pound – get set for a turbulent ride if trading cable. GBP/USD levels The analysts at Scotiabank noted that sterling gains through the overnight session have stalled in the 1.3240 area and the market has drifted lower as buyers have stepped aside: “We see support at 1.3185 on the day and feel that the 1.3250/00 area remains very significant resistance for Cable more broadly. Trend signals are mixed on the short, medium and longer run oscillators, suggesting broader, choppy range trading may persist.” FX Street FX Street FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions. View All Post By FX Street FXStreet News share Read Next Fed’s George: The path of policy cannot be on a pre-set course at this stage of the expansion FX Street 4 years GBP/USD has been in decline in the North American session, falling from a test of the R1 level at 1.3239 from a high of 1.3249 and printed a recent low of 1.3183 as the FX space gets tarnished with the same brush as equities. Brexit hopes are still elevated and that should underpin the pound, although EUR/GBP is also bleeding with the greenback in retreat and EUR/USD supported in resistance territory, consolidating while the pound struggles on Thursday to keep up - However, bulls still have a hand in the game while holding above the 10 DMA at 1.3083. 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