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  • GBP/USD struggled to build on the early uptick to three-month tops, around the 1.2730 region.
  • The risk of a no-deal Brexit took its toll on the British pound and prompted some long-unwinding.
  • The upbeat market mood undermined the safe-haven USD and might help limit deeper losses.

The GBP/USD pair surrendered a major part of its early gains and was last seen trading near the lower end of its trading range, around the 1.2670-65 region.

The pair failed to capitalize on its early uptick and once again witnessed a modest intraday pullback from the 1.2730 region, or near three month tops set on Friday. The pullback lacked any obvious fundamental catalyst and is more likely to remain limited on the back a subdued US dollar price action.

Friday’s upbeat US monthly jobs report reinforced expectations that the worst of the coronavirus pandemic was over and further fueled optimism over a potential V-shaped recovery for the global economy. This, in turn, remained supportive of the upbeat market mood and undermined the safe-haven greenback.

However, the increasing risk of a no-deal Brexit now seemed to take it toll on the British pound and seemed to be the only factor prompting some long-unwinding trade. It is worth recalling that the fourth round of the EU-UK post-Brexit negotiations last week ended without any significant progress on key issues.

The EU’s chief negotiator Michel said that the new deal must be sealed by October 31 at the latest and the door is still open to a transition period extension. Meanwhile, a senior UK negotiating official told Reuters that October is too late for a deal with and that we need to work intensively now, and into July.

It will now be interesting to see if the pair is able to attract any buying interest or the current pullback marks the end of the recent positive move. In the absence of any major market-moving economic releases on Monday, the broader market risk sentiment might influence the USD price dynamics and provide some impetus.

Technical levels to watch

 

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