GBP/USD hits 2-1/2-week high, around 1.2365 region ahead of Trump

• GBP/USD rebounds swiftly from sub-1.2300 levels amid a broad-based USD weakness.
• The intraday uptick seemed rather unaffected by not so optimistic Brexit headlines.
• The prevalent cautious mood failed to lend any support to the safe-haven greenback.
• Friday’s focus will remain on Trump’s reaction to China’s security law for Hong Kong.

The GBP/USD pair quickly reversed a mid-European session dip to sub-1.2300 level and jumped to the highest level since May 12, around the 1.2365-70 region.

The pair witnessed a sharp intraday pullback of around 75 pips from the 1.2360-65 resistance zone, albeit managed to attract some dip-buying at lower levels. The prevalent selling bias surrounding the US dollar was seen as one of the key factors that assisted the GBP/USD pair to regain some traction.

The greenback remained depressed on the back of Thursday’s dismal US GDP print, which showed that the economy contracted sharply by 5% annualized pace during the first quarter of 2020. This coupled with a fresh leg down in the US Treasury bond yields further undermined the USD demand.

Meanwhile, investors remain concerned about escalating diplomatic tensions between the world’s two largest economies, especially after China moved to tighten control over Hong Kong. The market worries helped revive demand for traditional safe-haven assets, albeit failed to impress the USD bulls.

Apart from a broad-based USD weakness, the GBP/USD pair uptick lacked any fundamental catalyst and also seemed rather unaffected by not so optimistic Brexit-related headlines. De Rynck, an adviser to EU chief Brexit negotiator Michel Barnier, talked down reports on fisheries from earlier in the week.

According to De Rynck, there is no appetite on the EU side to revise the mandate on fisheries and the is still similar. De Rynck further added that it is a tall order to get an agreement on fisheries by the deadline and we must find space for compromise.

It will now be interesting to see if the GBP/USD pair is able to capitalize on the move or runs into some fresh supply at higher levels as the focus remains on the US President Donald Trump’s news conference regarding China. Trump’s reaction will play a key role in influencing the broader market risk sentiment and produce some meaningful trading opportunities on the last day of the week.

Technical levels to watch