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  • GBP/USD trims early-day gains even as market sentiment cools down the US dollar.
  • Markets shrug off UK’s lockdown, Morgan Stanley predicts more QE from BOE.
  • Increasing odds of a blue wave favor risk-on mood.
  • China Research Group of Tory MPs suggest reconsideration over the investments in Beijing.

GBP/USD fades upside momentum while stepping back from the intraday high of 1.2937 to currently around 1.2920 ahead of Tuesday’s London open. The pair earlier benefited from the US dollar’s extended weakness, mainly due to the market’s risk-on mood. Though, recently cautious sentiment ahead of the US elections as well as economic fears for the UK weighs on the quote off-late.

BOE to keep bears happy…

With the second national lockdown hitting the already fragile British economy, global markets anticipate the BOE’s action during the “Super Thursday”. Among them, Morgan Stanley eyes £100 billion buying. While justifying the need, Jacob Nell from their team said, “With a national lockdown in place for at least a month and a far bigger hit to the economy compared to that stemming from the three-tier restrictions system in place in England until this Thursday, we think that the MPC will have to act more aggressively than we previously thought.”

On the other hand, Brexit party leader Nigel Farage is up and loud against the latest national activity restrictions and is poised to challenge the move in the house.

Further, Former UK diplomat Charles Parton said in a Tory report that it’s a time to get tough on China investment. The report cites Chinese hacking as the reason while saying, “As new technologies increasingly can be used for both benign and military or repression purposes, we need to ensure that investment does not harm our long-term security.”

Elsewhere, global markets remain mildly positive amid hopes that the Democrats are set to retake control of the US, in both the houses, to portray a blue wave. In doing so, market mood ignores a few polls suggesting recently interesting race between President Donald Trump and his rival Joe Biden.

Moving on, a light calendar and the pre-event trading lull can bore the market players ahead of the US elections. Though, risks may return to the table and propel the US dollar if Trump offers any surprises to the markets.

Read: 2020 US Elections: Equities in three scenarios

Technical analysis

Unless providing a daily closing below the 100-day EMA level of 1.2885, hopes of GBP/USD bounce towards regaining the 1.3000 threshold can’t be ruled out.