- A modest pickup in the USD demand prompted some fresh selling around GBP/USD on Tuesday.
- Concerns about the ever-increasing COVID-19 cases drove haven flows towards the greenback.
- Investors might refrain from placing aggressive bets, rather prefer to wait for fresh Brexit updates.
The GBP/USD pair remained depressed through the early European session and refreshed daily lows, around the 1.3330 region in the last hour, albeit lacked follow-through.
The pair failed to capitalize on the previous day’s solid intraday rebound from the 1.3225 region, or over two-week lows and met with some fresh supply during the early part of the trading action on Tuesday. As investors await fresh Brexit-related updates, a modest pickup in the US dollar demand was seen as one of the key factors exerting some pressure on the GBP/USD pair.
It is worth recalling that the pair witnessed some aggressive selling on the first day of a new trading week in reaction to the incoming Brexit headlines. The EU’s chief Brexit negotiator, Michel Barnier was reportedly very downbeat about the possibility of sealing a new trade deal with Britain and said that the three key outstanding issues remain open.
The British pound, however, managed to cut its losses on news that the UK Prime Minister Borish Johnson will travel to Brussels in a last-ditch effort to strike a post-Brexit trade deal. Johnson and European Commission President Ursula von der Leyen will look to find a common ground on the remaining significant differences – level playing field, governance and fisheries.
Meanwhile, the supporting factor, to some extent, was offset by growing market worries about the continuous surge in new COVID-19 infections. This, in turn, weighed on investors’ sentiment and drove some haven flows towards the greenback. However, increasing odds for more US fiscal stimulus measures might hold the USD bulls from placing fresh bets and cap the upside.
There isn’t any major market-moving economic data due for release on Tuesday, either from the UK or the US. Hence, investors will keep a close eye on the incoming Brexit developments, which should continue to play a critical role in driving the near-term sentiment surrounding the sterling and infuse some volatility around the GBP/USD pair.
Technical levels to watch