- GBP/USD drops near 30 pips in early Asian trading, defies Friday’s recovery moves.
- UK PM Johnson announced one-month national lockdown over the weekend.
- EU, UK seem to overcome the impasse over fisheries, Brexit talks continue.
- Month-start PMIs to entertain short-term traders during the key week.
GBP/USD declined from 1.2952 to 1.2920, before bouncing off to 1.2926, during the early Monday morning in Asia. In doing so, the pair reacted to the UK PM Boris Johnson’s announcement of national lockdown while paying a little heed to the positive headlines concerning Brexit. It should additionally be noted that the US dollar’s broad strength, amid risk-off mood, also exerted downside pressure on the quote.
Virus woes dominate over Brexit news….
Having initially refrained from recalling the nation-wide activity restrictions, UK PM Johnson announced lockdown from Thursday, November 5, and until December 2 to justify his message that the virus is doubling faster, that we can conceivably add capacity.
Read: UK PM Boris Johnson announces new nationwide lockdown to curb coronavirus
Elsewhere, a quote of the European Union (EU) fishing boats into the British waters is something the Brexit parties are negotiating for the last few days. Bloomberg came out with the upbeat news suggesting that the policymakers are near to a solution to the key hurdle. However, important issues raised by the Internal Market Bill (IMB) still act as the barrier to a successful divorce deal.
In his latest comments, the Tory leader Johnson said that there is no alternative to the national lockdown. The national leader also mentioned that science shows COVID-19 deaths could be twice as high as fist wave without action.
Read: Brexit negotiators move close to breaking key impasse over fish – Bloomberg
On the other hand, the US dollar benefits from the market’s risk-off mood as the coronavirus (COVID-19) is getting stronger again in the US and Europe. Also challenging the risk sentiment could be the delay in the American COVID-19 aid package and the cautious mood before the US presidential election, scheduled for November 03.
Amid these catalysts, S&P 500 Futures drop 0.70% whereas the US dollar index (DXY) seesaws near the highest since late September.
Moving on, second reading of the UK’s October Manufacturing PMI and the initial figures of the US ISM Manufacturing PMI can offer short-term direction to GBP/USD traders. However, risk events like Brexit, covid and US election will be the key drivers.
Technical analysis
Although a descending trend line from October 21, currently around 1.2975, restricts immediate upside of the GBP/USD prices, a daily closing below the 100-day SMA level of 1.2882 becomes necessary for the bears’ entry.
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