- GBP/USD faced rejection near the 1.3200 mark and witnessed a modest pullback on Monday.
- Comments by Ireland’s Coveney revived no-deal Brexit fears and weighed on the British pound.
- A subdued USD price action helped limit the downside ahead of BoE Governor Bailey’s speech.
The GBP/USD pair fell around 55-60 pips during the early European session and refreshed daily lows, around the 1.3140 region in the last hour.
The pair built on last week’s strong positive move of over 300 pips and gained some follow-through traction through the first half of the trading action on the first day of a new week. The momentum was exclusively sponsored by a softer tone surrounding the US dollar, which was being pressured by a combination of factors.
The Democratic candidate Joe Biden’s victory in a nail-biting US Presidential election eliminated some of the uncertainties. Meanwhile, the possibility of a split Congress fueled speculations that the Fed will be forced to ease further to support the COVID-hit economy. This, in turn, continued exerting some pressure on the greenback.
However, persistent Brexit-related uncertainties held bulls from placing any aggressive bets and kept a lid on any further gains for the GBP/USD pair. Meanwhile, the latest leg of a sudden fall over the past hour or so followed comments by Irish foreign minister, Simon Coveney, saying that we are in the end game now on Brexit talks.
Given that British and EU negotiators are yet to find a compromise on key sticking points – the so-called level-playing field, fisheries and state-aid rules, the remarks resurfaced markets fears of a no-deal Brexit. This comes ahead of a vote on the UK Internal Market Bill in the House of Lords, which took its toll on the British pound.
It is worth reporting that another source of conflict between the UK and the EU is Britain Prime Minister Boris Johnson’s determination to press ahead with the controversial legislation. The so-called Internal Market Bill admittedly breaks international law in a “specific and limited way” and override clauses in the Brexit Withdrawal Agreement related to Northern Ireland.
The downside, however, remains cushioned, at least for the time being, as investors seemed reluctant to place any aggressive bets, rather preferred to wait for an official statement on Brexit. Apart from this, traders on Monday will also take cues from a scheduled speech by the Bank of England Governor Andrew Bailey and chief economist Andy Haldane.
Technical levels to watch
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