- GBP/USD witnessed some volatility in reaction to the UK PM Johnson’s Brexit-related comments.
- The pair found some support after Johnson said that he is not walking away from negotiations.
- A weaker USD assisted the pair to rebound from lows ahead of the US monthly retail sales data.
The GBP/USD pair quickly recovered over 50 pips from the mid-European session dip to over one-week lows and now seems to have stabilized in the neutral territory, just above the 1.2900 mark.
The pair failed to capitalize on its early uptick, instead witnessed some aggressive selling near the 1.2960 region in reaction to the UK Prime Minister Boris Johnson’s Brexit-related comments. Johnson said that he would seek a no-deal Brexit unless there was a fundamental change of approach from the European Union.
Johnson’s call to prepare for a no-deal Brexit took its toll on the British pound and led to the GBP/USD pair knee-jerk fall of around 100 pips. Johnson further clarified that he is not completely walking away from negotiations. This, in turn, was seen as a key factor that helped limit any deeper losses for the pair.
The pair once again showed some resilience ahead of mid-1.2800s and was further supported by a weaker tone surrounding the US dollar. A slight improvement in the global risk sentiment – as depicted by indications of a positive opening in the US equity markets – undermined the greenback’s perceived safe-haven demand.
However, concerns that a steep rise in new coronavirus cases could lead to renewed lockdown measures and hinder the global economic recovery extended some support to the USD’s status as the global reserve currency. This could further contribute towards capping any runaway rally for the GBP/USD pair, at least for now.
Next on tap will be the release of the US monthly Retails Sales figures. The US economic docket also features the release of Industrial Production data and the preliminary estimate of the October Michigan Consumer Sentiment Index. This, along with the broader market risk sentiment, should assist traders to grab some meaningful opportunities on the last day of the week.
Technical levels to watch
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