- GBP/USD bulls stay cautiously positive despite week-start gap-up of over 100 pips.
- Brexit talks to continue for one more week as policymakers prefer to “go the extra mile”.
- UK-EU talks suggest more problems than fishing, level playing, PM Johnson reiterates major differences.
- Light calendar highlights risk catalysts as the key.
GBP/USD trims the daily gains while easing to 1.3313 ahead of Monday’s London open. The Cable began the week with a gap-up opening as bulls cheered the European Union (EU) and the UK’s decision to extend the Brexit talks for one more week. However, chatters concerning the no-deal departure weigh on the market optimism.
Although the EU and the UK showed readiness to take one more chance of getting together on the Brexit trade deal, fears of a haphazard exit couldn’t be ignored. BBC’s Iain Watson suggests that the ex-neighbors recently developed more differences than the previous key hurdle, like fisheries and level playing field. On the other hand, the Financial Times (FT) conveyed that the EU states have been warned not to entertain side deals with Britain, which would ease the consequences of a no-deal Brexit.
Additionally, Reuters came out with the news suggesting Talks between Britain and the European Union on a post-Brexit trade deal will continue overnight but London believes the current offer from the EU remains unacceptable.
While global markets cheered an intermediate relief to the Brexit watchers, policymakers from London and Brussels need to develop a strategy to not let this opportunity be wasted. Though, a few odds are favoring that the Tories will not show readiness to compromise until Brussels ease a bit.
Other than the Brexit chatters, the vaccine optimism and hopes of the US coronavirus (COVID-19) stimulus offers a positive start to the week. While stocks futures cheer the optimism, the US 10-year Treasury yields follow the suit.
Looking forward, the British reaction to the latest Brexit development and the EU’s readiness to push more efforts for a deal will be the key element that can keep the GBP/USD bulls happy. Meanwhile, the no-deal Brexit fears lurk beneath the table and can jump on anytime to change the sentiment.
Technical analysis
10-day SMA guards immediate upside around 1.3365 ahead of the monthly resistance line near 1.3420. Meanwhile, fresh selling can wait for a daily closing below 50-day SMA, at 1.3157 now.
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