- News that Brexit talks were close to breaking down prompted some aggressive selling on Tuesday.
- Renewed trade pessimism benefitted the USD’s safe-haven status and added to the selling bias.
- The incoming Brexit headlines might continue to influence ahead of FOMC meeting minutes.
The GBP/USD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow band just above one-month lows set in the previous session.
The recent bearish pressure surrounding the British Pound picked up the pace on Tuesday in reaction to reports that Brexit talks between Britain and the European Union were close to breaking down. In a telephone call on Tuesday, German Chancellor Angela Merkel told British Prime Minister Boris Johnson to keep Northern Ireland in the EU customs union and that a deal was overwhelmingly unlikely. This was followed by the European Council President Donald Tusk’s tweet, saying that the UK PM is playing a stupid blame game.
Stronger USD adds to Brexit-led selling bias
The pair dropped to sub-1.2200 levels – the lowest since September 4 – and was further pressurized by a goodish pickup in the US Dollar demand. The US decision to impose visa restrictions on Chinese officials, together with the blacklisting of Chinese firms over the treatment of Muslim minorities, threatened to derail US-China trade talks. The development sparked a fresh wave of global risk-aversion trade, which benefitted the Greenback’s relative safe-haven status against its British counterpart.
Meanwhile, the USD bulls failed to capitalize on the overnight positive move amid a mildly weaker tone around the US Treasury bond yields. However, news of further resignations by a group of ministers further dented the already weaker sentiment around the Sterling and did little to assist the pair to register any meaningful recovery through the Asian session on Wednesday.
The incoming UK political/Brexit-related headlines might continue to act an exclusive driver of the pair’s momentum amid absent relevant market moving economic releases from the UK. Later during the North-American session, the Fed Chair Jerome Powell’s scheduled speech might provide some short-term trading impetus ahead of the important release of the minutes of the latest FOMC policy meeting held on September 17-18.
Technical levels to watch