- GBP/USD gained some strong traction on Monday and shot to the highest level since September 2.
- Dovish Fed expectations, COVID-19 vaccine optimism undermined the USD and remained supportive.
- Upbeat UK PMI prints provided an additional boost to the British pound despite Brexit uncertainties.
The GBP/USD pair now seems to have entered a bullish consolidation phase and was seen oscillating in a range, around the 1.3380 region, levels not seen since early September.
The pair caught some fresh bids on the first day of a new trading week and finally broke through the 1.3310 supply zone. The momentum was supported by sustained US dollar selling and got an additional boost following the release of better-than-expected UK PMI prints for November.
Investors seemed to have started pricing in the possibility for additional monetary easing by the Fed in December amid concerns about the economic fallout from the imposition of new COVID-19 restrictions. The greenback was further pressured by the optimism over a potential COVID-19 vaccine.
On the other hand, the British pound benefitted from upbeat UK PMIs and seemed rather unaffected by Brexit anxieties. In the latest Brexit-related developments, the EU’s chief Brexit negotiator Michel Barnier said on Monday that fundamental differences remain in the trade talks with the UK.
Barnier’s comments come on the back of the EU negotiating team’s briefing on Friday that Brexit talks remain unresolved on three sticking points – the so-called level playing field, fisheries and state-aid rules. The lack of progress, however, did little to prompt any selling around the sterling.
The GBP/USD pair shot to the highest level since September 2, though the strong intraday positive momentum paused near a resistance marked by the top boundary of a two-month-old ascending channel. This, in turn, warrants some caution before positioning for any further appreciating move.
Market participants now look forward to the release of the flash US Manufacturing/Services PMIs for a fresh impetus during the early North American session. This, along with the incoming Brexit-related headlines could infuse some volatility and produce some meaningful trading opportunities.
Technical levels to watch
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