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  • USD has seen a pick-up in recent trade, with DXY moving back above 92.00 having rallied into the US close and pre-Asia session.
  • USD strength has pushed GBP/USD back towards lows of the day around in the 1.3320s.
  • The pre-release of FOMC Chair Powell and Treasury Secretary Mnuchin’s prepared testimonies to the Senate Banking Committee appeared to spur USD gains.

GBP/USD has moved back to the lower bounds of its intra-day range amid a renewed wave of broad USD strength, the pair currently trading around the 1.3320 mark. Still, GBP/USD managed to close Monday FX trade with gains of around 10 pips or 0.15%.

US dollar fights back

The US dollar continued its fightback right into the close of Monday FX trade, with DXY managing to cross back above the 92.00 level. Given that US equity index futures rallied in tandem with USD in recent trade, that suggests that the move was not being driven by appetite for safe havens or even anything to do with risk appetite. The choppy/mixed feeling to markets on Monday is typical of unpredictable month-end flows; traders will hope that typical correlations reassert themselves tomorrow (i.e. that USD and US equities move inversely to each other).

FOMC Chairman Jerome Powell and US Treasury Secretary Steven Mnuchin released the remarks of their statement to the Senate Banking Committee that they will make in-person during Tuesday’s US session, the contents of which did not appear to contain anything either new or unexpected. Nonetheless, market observers noted that the release of these statements seemed to exacerbate USD upside at the time of release (shortly after the US equity market close at 21:00GMT).

Powell reiterated that the outlook for the economy is uncertainty and hinges on the path of pandemic and whilst the economic recovery continues, the pace of the recovery, including in the labour market, has moderated. Moreover, he reiterated that while recent vaccine news is good, the recent rise in Covid-19 cases is concerning and could prove challenging in the months ahead. Thus, Powell reiterated that the Fed remains committed to using its full range of tools to support the economy moving forward.

What’s most important here is what’s nowhere; i.e. any hints as to further FOMC easing in December. Perhaps the lack of any sort of nod towards incoming tweaks to the FOMC’s current QE programme (be that tweaks to the pace, composition or guidance) is being taken as a disappointment/USD positive. If that were the case though, US equity index futures would likely be falling – In recent trade, they have advanced back beyond Monday highs.

Treasury Secretary Mnuchin, meanwhile, urged Congress to do something with the $455B in repatriated funds from the soon to end Fed emergency lending facilities. Most analysts agree that stimulus is unfortunately unlikely prior to 2021.

Sterling awaits meaningful Brexit developments

GBP traders appear to have developed some sort of fatigue to Brexit updates. Or, at least, any Brexit update that suggests the two sides are still at an impasse. It seems now the next big Brexit-triggered GBP move is likely to come from the news that either significant progress towards a deal is actually being made (i.e. a deal made on one of the key sticking points such as fisheries, state aid or level playing field), or that talks have collapsed. Prior to that, GBP traders might be inclined to keep the currency rangebound vs its major peers.

GBP/USD’s 1.3300ish-1.3400 range still key

GBP/USD’s recent intra-day range that has seen the pair remain mostly within the 1.3300 and 1.3400 levels remains the most important areas of support and resistance to watch.