- GBP/USD regained strong positive traction on Thursday and jumped closer to mid-1.3400s.
- COVID-19 vaccine optimism kept the USD bulls on the defensive and remained supportive.
- Hopes for a last-minute Brexit deal benefitted the pound, despite not so optimistic headlines.
The GBP/USD pair continued scaling higher through the mid-European session and jumped back to three-month tops, around the 1.3435-40 region in the last hour.
Following the previous day’s pullback and a subsequent bounce from sub-1.3300 levels, the pair caught some fresh bids on Thursday and was being supported by a combination of factors. The US dollar remained depressed amid the latest optimism over the first approval of a COVID-19 vaccine and reviving hopes for more US fiscal stimulus.
Wednesday’s disappointing ADP report added to the recent market worries about the potential economic fallout from the continuous surge in new coronavirus cases in the United States. This, in turn, puts pressure on the US Congress to agree on additional fiscal stimulus measures to aid the US economy and kept the USD bulls on the defensive.
The British pound got an additional boost after Ireland’s Foreign Minister, Simon Coveney said that there was a good chance that Britain and the European Union would secure a trade deal in the next few days. Adding to this, the British Education Secretary Gavin Williamson said that the UK and EU are making good progress on the Brexit trade deal negotiations.
Bulls shrugged off the pessimism led by comments from an EU diplomat, saying that issues such as the level playing field and fisheries are still outstanding. This comes on the back of the EU chief Brexit negotiator Michel Barnier’s overnight remarks that Brexit talks have reached a make-or-break moment, though did little to prompt any selling around the GBP/USD pair.
Investors will keep a close eye on Brexit developments, which should continue to play a key role in influencing the sentiment surrounding the sterling. Apart from this, Thursday’s US economic docket – featuring the releases of Initial Weekly Jobless Claims and ISM Services PMI – will be looked upon for some short-term trading opportunities.
Technical levels to watch
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