GBP/USD stays heavy below 1.2900 as Brexit talks derail

• GBP/USD tilts southwards following its U-turn from 1.2978.
• EU files legal case against the UK over IMB passage, Brexit talks in Brussels still controlled by differences.
• US policymakers jostle over stimulus ahead of the Nonfarm Payrolls.
• Closing announcements of final scheduled Brexit talks and the EU Summit will be the key.

Despite bouncing off an intraday low of 1.2855, GBP/USD remains heavy around 1.2862, down 0.22% on a day, while heading into the London open on Friday. The reversed from one week high on Thursday as the European Union (EU) complained over the British Internal Market Bill (IMB). Also, comments from the UK Minister Michel Gove and expectations of no drastic economic pullback offer extra burden on the Cable. Moving on, GBP/USD traders will be concerned with the final statements of the EU-UK diplomats as they close the on-book last round of departure negotiations. Further, a two-day EU summit and the monthly employment data from the US, coupled with the American aid package headlines, will entertain the pair traders.

Brexit pessimism return to the table…

In a response to the British lower Parliament’s passage of IMB, the European Commission filed a complaint terming it as a breach of the international Brexit agreement. Following the announcement, the UK PM Boris Johnson’s spokesperson announced no intention to step back. On the other hand, the head of the EU’s executive Commission, Ursula von der Leyen said, as per Reuters, “We had invited our British friends to remove the problematic parts of their draft Internal Market Bill by the end of September. The deadline lapsed yesterday.”

It should also be noted that the UK’s minister handling Brexit divorce issues, Micheal Gove, conveyed a lack of progress from the on-going talks in Brussels. “There are still differences between Britain and the European Union in their talks on a trade agreement, but London will work hard to try to secure a deal,” said the diplomat.

On Thursday, the upbeat prints of UK Manufacturing PMI and stabilization in the coronavirus (COVID-19) cases failed to put a floor under the GBP/USD prices. The reason could be spotted, other than the Brexit issues, in the updates from the British Chambers of Commerce (BCC) that suggest the UK’s firms aren’t seeing any ‘V’-shaped recovery.

Talking about the US, American Congress members keep failing to break the stimulus deadlock even as Democrats passed the COVID-19 bill with a $2.2 trillion offer in the House. The bill will be voted, expectedly in the Senate on Friday before heading to President Donald Trump for a sign.

On a different page, the pre-NFP cautious sentiment joins the anticipated increase in the US-China tussle to weigh on the market’s risk-tone. The same drag S&P 500 Futures while stocks in Asia-Pacific are trading mixed.

With the increasing pressure on the Brexit and US stimulus headlines, any surprise improvement in the US employment will be enough for the GBP/USD sellers to attack the September month’s low near 1.2675.

Read: US Employment Situation Report September Preview: A challenge to define normality

Technical analysis

100-day and 200-day EMA offer the key support to the GBP/USD prices as MACD flashes the strongest bullish signals since early September. Even so, the pair’s immediate downside towards 100-day EMA near 1.2830 can’t be ruled out. On the contrary, any surprises will need to cross September 16 peak surrounding 1.3010 to convince the buyers.