- A combination of factors prompted some selling around GBP/USD on Friday.
- Johnson’s comments tempered Brexit optimism and weighed on the sterling.
- Softer risk tone benefitted the safe-haven USD and added to the selling bias.
The GBP/USD pair maintained its offered tone near mid-1.3500s and moved little following the release of UK monthly Retail Sales figures.
According to the data released by the UK Office for National Statistics (ONS), the headlines sales contracted by 3.8% MoM in November as against a 4.2% fall anticipated. The core retail sales, stripping the auto motor fuel sales, dropped -2.6% MoM as compared to a 3.3% decline expected. The readings marked a notable drop from the previous month’s growth of 1.2% and 1.3%, respective, albeit did little to prompt any fresh selling around the GBP/USD pair.
That said, the British pound remained under some selling pressure after the UK Prime Minister Boris Johnson poured cold water on the prospect for a last-minute Brexit deal. Johnson said that it was likely a deal wouldn’t be reached unless the European Union shifts its position substantially over key sticking issues, including fishing quotas. This, coupled with a modest US dollar short-covering bounce contributed to the weaker tone surrounding the GBP/USD pair.
A modest pullback in the equity markets seemed to be the only factor that extended some support to the safe-haven greenback amid near-term oversold conditions. However, hopes for additional US fiscal stimulus measures and the latest optimism over the rollout of COVID-19 vaccines might cap the attempted USD recovery. This makes it prudent to wait for some follow-through selling before confirming that the GBP/USD pair has topped out in the near-term.
Nevertheless, the incoming Brexit-related headlines will play a dominant role in influencing the sentiment surrounding the sterling and continue to infuse some volatility around the GBP cross.
Technical levels to watch
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