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  • A combination of factors prompted some fresh selling around GBP/USD on Tuesday.
  • Brexit uncertainties turned out to be a key factor that continued to weigh on the GBP.
  • COVID-19 jitters benefitted the safe-haven USD and contributed to the selling bias.

The GBP/USD pair maintained its offered tone through the mid-European session and refreshed daily lows, around the 1.3310 region in the last hour.

Following the previous day’s solid intraday rebound from over two-week lows, around the 1.3225 region, the pair met with some fresh supply on Tuesday and was pressured by a combination of factors. The deadlock in Brexit talks continued to weigh on the British pound, which, along with a modest pickup in the US dollar demand, prompted some selling around the GBP/USD pair.

It is worth recalling that significant differences remain open on the three key outstanding issues – the so-called level playing field, governance and fisheries. The UK Prime Minister Boris Johnson will travel to Brussels for a face-to-face meeting with European Commission President Ursula von der Leyen in a last-ditch effort to strike a post-Brexit trade deal.

Meanwhile, growing market worries about a sharp rise in new COVID-19 infections overshadowed the recent optimism over a vaccine rollout and the possibility of more US fiscal stimulus. This was evident from a slight deterioration in the global risk sentiment, which drove some haven flows towards the USD and further contributed to the GBP/USD pair’s weakness.

Despite the negative factors, the pair, so far, has managed to defend the 1.3300 mark as investors preferred to wait for fresh Brexit updates in order to determine the next leg of a directional move. This, in turn, makes it prudent to wait for some strong follow-through selling before positioning for any further depreciating move amid absent relevant macro releases.

Technical levels to watch