- GBP/USD’s recovery capped at 1.2940, turns down to 1.2900.
- The second lockdown in the UK weighs on the pound.
- GBP/USD expected to be under pressure this week – UOB.
Sterling’s recovery attempt from session lows at 1.2855 during the early London session on Monday has been capped at 1.2940. The pair has pulled down again during the North American session and is testing levels below 1.2900 at the time of writing.
A second lockdown in the UK weighs on the pound
Cable has opened the week on the back foot, retracing the moderate recovery staged on Friday as the Prime Minister, Boris Johnson, announced this weekend the introduction of a one-month lockdown. The quick spread of the second COVID-19 wave, reaching more than 20,000 infections registered per day, has prompted experts to alert about the possibility of exceeding the worst-case scenario of 80,000 casualties this winter.
Downside moves, however, remain contained so far, with the pound underpinned by market hopes of a Brexit deal. The lack of news from the negotiations as the European and British representatives work to break the deadlock over the most difficult issues are feeding expectations of a last-minute agreement that will avoid an unorderly exit from the Union.
Earlier today, the British Manufacturing PMI, showed that the British factory activity lost momentum in October, with the producers of consumer goods experiencing a stronger slowdown amid the increase of COVID-19 cases. The impact of these figures on the GBP, however, has been muted.
GBP/USD deemed to be under downward pressure this week – UOB
On the technical domain, the FX analysis team at UOB sees the pound’s risk skewed to the downside, with key support at 1.2845: “Downward momentum has improved further but still appears lacklustre for now. From here, GBP is deemed to be under mild downward pressure and could gravitate towards the major support at 1.2845. On the upside, a break of 1.3030 would indicate the current mild downward pressure has eased.”
Technical levels to watch
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