- GBP/USD regained some positive traction and recovered a part of the overnight steep fall.
- A rebound in the equity markets weighed on the safe-haven USD and remained supportive.
- Brexit-related uncertainties held bulls from placing aggressive bets and capped the upside.
The GBP/USD pair refreshed daily tops, around the 1.2930 region during the early North American session, albeit quickly retreated few pips thereafter.
The pair managed to regain positive traction on Wednesday and recovered a part of the previous day’s sharp intraday slide of around 140 pips from the key 1.3000 psychological mark, or near four-week tops. The British pound took a hit on Tuesday after reports indicated that the EU has no plans to offer concessions to the UK Prime Minister Boris Johnson before next week’s Brexit deadline.
Despite the negative headlines, the GBP/USD pair managed to find decent support near the 1.2865 region and edged higher through the first half of the trading action on Wednesday. The uptick was further supported by a modest US dollar pullback from highs. A goodish rebound in the equity markets undermined the greenback’s relative safe-haven status against its British counterpart.
Investors now seemed to have digested the US President Donald Trump’s decision on Tuesday to end negotiations with Democrats on the economic stimulus package. Trump’s surprise move fueled concerns about the already shaky US economic recovery and spoofed investors. This, in turn, triggered a steep decline in the US equity markets, though the market reaction turned out to be short-lived.
The GBP/USD pair, however, lacked any strong follow-through buying and remained capped amid persistent Brexit-related uncertainties. In the latest development, Irish Foreign Minister Simon Coveney was out with some comments and said that the European Union (EU) Chief Brexit Negotiator Michel Barnier will not agree on intensified negotiations unless the UK moves its stance on state aid.
Looking at the technical picture, the GBP/USD pair on Tuesday confirmed a near-term bearish break through the 100-day SMA and a one-week-old ascending trend-line confluence support. The set-up favours bearish traders. Hence, any attempted positive move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly amid absent relevant market-moving economic data.
Later during the US session, the release of the latest FOMC monetary policy meeting minutes will be looked upon for some impetus. This, along with the broader market risk sentiment, will influence the USD price dynamics and produce some short-term trading opportunities.