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  • GBP/USD seesaws in a choppy range between 1.2950 and 1.2973 after declining to six-week low during early Asia.
  • UK PM recalls virus-led restrictions, chatter over Withdrawal Agreement Bill (WAB) keeps confusing the EU.
  • News from AstraZeneca, China data trigger risk reset but UK bond yields and volatility still favor bears.

GBP/USD stays on the back foot around 1.2960 while heading into the London open on Thursday. The cable prints a 0.15% daily loss as taking rounds within a small trading range near the lowest since late-August. The fears of no-deal Brexit and recall of the coronavirus (COVID-19)-led restrictions weigh on the quote. The pair marked the heaviest drop in six months the previous day after Tories flashed hints of editing the WAB and warn the European Union (EU) over the October 15 deadline.

Adding to the market’s pessimism, AstraZeneca announced a halt to its third phase of COVID-19 vaccine trials, which in turn derailed the hopes of the UK getting the pandemic’s cure by early 2021, as Health Secretary Matt Hancock initially suggested. The move dragged the UK two-year gilts to record low and refreshed the multi-day bottom of the Pound. Though, news that the halt was “routine” joined China’s August month employment data to trigger the risk reset. Even so, the British Pound (GBP) volatility index rose to a three-month high.

With the UK PM Boris Johnson’s fresh restrictions, based on the latest resurgence in the pandemic, are likely to hinder the recently picking up British activities, fears of the Bank of England’s (BOE) rate cut gains momentum and drag the quote in turn. It should also be noted that the British summon to the Russian ambassador over the poisoning of Kremlin critic Alexei Navalny adds to the risk-off mood but optimism surrounding the UK-US and the London-Tokyo trade negotiations challenge the bears.

On the other hand, US policymakers keep disliking China and signal more sanctions while internally jostling over the aid package. Further, tech rout at the Wall Street, after Tesla’s 17% drop, also played its part in supporting the risk-off momentum.

Against this backdrop, the US dollar index (DXY) seesaws around the one month high whereas stocks in Asia-Pacific remain dismal. Furthermore, the US 10-year Treasury yields weaken by 1.7 basis points (bps) to extend the previous day’s weakness under 0.70%.

Moving on, updates from the UK-EU negotiations over the Brexit WAB will be the key. Tories have recently started pushing for Canada style trade relations while keeping the fisheries as a bargaining point. However, negotiators from the Brussels are less in a mood to entertain any such demand and hence risking another gloomy day for the Pound traders amid a light calendar and broad risk-aversion.

Technical analysis

Failures to break 50-day SMA, needless to mention about an ascending trend line from late-March and June month’s top, suggest further consolidation of the quote. Though, the 1.3000 threshold and August 24 low near 1.3050/55 guard the pair’s immediate upside ahead of March month’s peak of 1.3200.