GBP/USD crawls up to the upper range of 1.2400 to consolidate weekly gains

• GBP/USD’s reversal from 1.2529 holds at 1.2439 and the pair ticks up to 1.2475.
• Brexit uncertainty is keeping GBP upside uptrends in check.
• A trade deal with the EU could push the GBP/USD to 1.40.

The pound is set to close its best performance of the last four weeks with a 1.2% weekly gain against the US dollar. The cable has crawled up to 1.2470 area to consolidate its rebound from 1.2250 lows earlier this week

Brexit remains keeping GBP uptrends in check

The GBP/USD has been trading in range on a quiet session, with US markets shut for the Independence Day bank holiday. The pair’s reversal from Thursday’s highs at 1.2529 has been contained at 1.2439 before ticking up again and return to 1.2475 area.

Speculation about the EU and UK negotiators softening their positions has triggered hopes about the possibility of a breakthrough in the coming weeks. This has eased investors’ fears of a no-deal exit from the Union and has given some respite to the GBP.

Beyond that, the moderate risk aversion prevailing on Friday with the focus shifting back to the increase of coronavirus cases, combined with the overall Brexit uncertainty and the weak UK economic outlook, which has generated speculation of BoE negative interest rates in 2021, remain weighing on the pound.

GBP/USD: Brexit deal could push the pair to 1.40 – Standard Chartered

According to the FX Analysis Team at Standard Chartered, the market is too negative regarding the potential of a Brexit deal that could boost the pair to 1.40 area, “We think the market is too downbeat on the potential for a ‘good’ outcome: a deal or extension of the transition period (…) We forecast GBP/USD at 1.40 at year-end based on a good outcome (and EUR/USD 1.16) (…) In a ‘bad’ outcome – no deal – we could see both GBP and EUR trade to 1.10 versus the USD (and hence EUR/GBP to parity).”

GBP/USD key levels to watch