GBP/USD climbs to fresh weekly highs above 1.2900

• EU’s Barnier says EU and UK have “very difficult” disagreements.
• Unit Labor Costs in US rose less than expected in fourth quarter.
• US Dollar Index stays below 97 ahead of Factory Orders data.

The GBP/USD capitalized on the broad-based USD weakness during the European trading hours and broke above the 1.2900 handle to touch its highest level in a week at 1.2937. As of writing, the pair was up 0.37% on a daily basis at 1.2917.

The sharp fall witnessed in the US Treasury bond yields and heightened odds of the Federal Reserve opting out for another 25 basis points rate cut at its next meeting in March weighs on the greenback on Thursday.

After closing the previous day 0.23% higher, the US Dollar Index (DXY) reversed its direction and slumped below the 97 mark. Meanwhile, the data published by the US Bureau of Labor Statistics showed that Unit Labor Costs in the fourth quarter rose 0.9% to miss the market expectation of 1.4% and put additional weight on the greenback’s shoulders. At the moment, the DXY is erasing 0.41% on the day at 96.96. 

GBP ignores Barnier’s comments

On the other hand, while speaking to reporters in a press conference after the first round of negotiations with the UK, EU Brexit Negotiator Barnier said the EU and the UK had “very very difficult” disagreements in trade negotiations. “There are many divergences between the EU and the UK on the future relationship,” Barnier noted. “Serious divergences include a level playing field.”

There won’t be any macroeconomic data releases featured in the UK economic docket on Friday and investors will be paying close attention to the Nonfarm Payrolls data from the US.

Technical levels to watch for