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  • UK-EU hopeful of tackling issues over fisheries, IMB and others are still in the line.
  • Second lockdown in England triggers the fears of double-dip recession.
  • Activity numbers from the UK, US can offer intermediate clues, US elections in the spotlight.

GBP/USD stays offered near the intraday low of 1.2899, currently around 1.2904, while heading into the London open on Monday. In doing so, the pair traders bear the burden of the UK’s second national lockdown while ignoring upbeat news favoring odds of a soft Brexit. Also weighing the quote could be the US dollar gains amid the cautious sentiment ahead of tomorrow’s American election. It should, however, be noted that the October month’s activity numbers for the UK and the US can offer immediate direction to the pair.

Double-dip recession?

To avoid over 20% GDP contraction, as it happened during the first lockdown in April, the BOE is expected to announce further easy money during this week’s monetary policy meeting, signaled The Guardian. The news said, “Bank of England (BOE) policymakers are expected to inject up to £100bn into the economy when they meet this week amid mounting fears that the four-week lockdown for England will lead to a double-dip recession.”

Other than the economic fears, worries that the death toll could be doubled, as indicated by UK PM Boris Johnson, join a longer than initially anticipated lockdown, at least till early 2021, suggested by The Times, also weigh on the GBP/USD.

In doing so, the Sterling ignores the news that the Brexit negotiators from the European Union (EU) and Britain are near to tackling the stalemate over fisheries via the quota system. While the recent talks, which are to continue this week, suggested a possible solution to the key hurdle, discussions over the UK’s Internal Market Bill (IMB), level playing field and governance are still in limbo, which in turn raise prospects of no-deal Brexit.

On the other hand, the early polls suggest that US President Donald Trump is gaining bids off late versus its election rival Joe Biden, which in turn makes tomorrow’s polling the key and interesting.

Read: 2020 Elections: Three states traders should watch, plus places that could provide surprises

Amid all these plays, S&P 500 Futures print mild gains while stocks in Asia-Pacific and the US 10-year Treasury yields also join the league amid cautious optimism.

Looking forward, the second reading of the UK’s October month’s Manufacturing PMI, expected to confirm 53.3 initial forecast, can offer immediate direction to the pair ahead of the US ISM Manufacturing PMI for the said month, likely rising to 55.6 versus 55.4.

Technical analysis

A daily closing below the 100-day SMA level of 1.2882 becomes necessary for the bears’ entry whereas short-term upside gets restricted by a descending trend line from October 21, currently around 1.2975. Overall, the bearish sentiment remains dominant amid broad US dollar strength and a sustained break of a five-week-old support line, now resistance.