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  • Renewed USD selling prompted some short-covering move around GBP/USD on Tuesday.
  • The uncertain US political situation was seen as a key factor weighing on the greenback.
  • The risk-on mood further undermined the safe-haven USD and remained supportive.

The intraday USD selling bias picked up pace during the early European session and pushed the GBP/USD pair to daily tops, around the 1.2980 region in the last hour.

The pair build on the previous day’s goodish rebound from the 1.2855 region, or over two-week lows and gained some strong follow-through traction through the first half of the trading action on Tuesday. As investors looked past the imposition of the second nationwide lockdown in the UK, the emergence of some fresh selling around the US dollar was seen as a key factor driving the GBP/USD pair higher.

Investors now seemed inclined to unwinding their USD bullish bets amid growing wariness about the actual outcome of Tuesday’s US presidential election. Adding to this, the upbeat market mood – despite concerns about the economic fallout from the coronavirus-induced restrictions – further dented the greenback’s relative safe-haven status.

Meanwhile, the continuation of intensive Brexit talks was seen as a sign that both, the EU and the UK are still pushing to seal a new partnership agreement before the end of the transition period. Reviving hopes for a last-minute Brexit deal provided an additional boost to the British pound and remained supportive of the strong intraday positive move for the GBP/USD pair.

Apart from this, the latest leg of a sudden spike over the past hour or so could further be attributed to some technical buying on a sustained move beyond the overnight swing highs, around the 1.2940 region. The momentum has now pushed the GBP/USD pair beyond a short-term descending trend-channel, through the upside is likely to remain limited ahead of the key event risk – the US elections.

Technical levels to watch