GBP/USD has been in a bullish mood on Wednesday, benefiting from almost non-existent volumes on Christmas Day. Both the UK and US markets are closed all day.
The pair is currently trading at 1.2975, up 0.24% as of 1:22 PM UTC. However, the short-term rebound is not relevant amid such low volumes. When investors come back after the holiday, the chances are that the pair will extend its bearish path.
The British pound has been under pressure for more than a week after UK Prime Minister Boris Johnson revealed his intention to rule out any attempt to extend the Brexit transition deadline beyond December 2020. He has already amended the Withdrawal Agreement Bill (WAB) to reflect this proposal. The updated bill was voted by a Conservative-led parliament on Friday. The UK is about to leave the European bloc by January 31, 2020, and has only 11 months to reach a trade deal with the European side. Investors fear that this tight timeline might not be enough, which could eventually lead to a no-deal Brexit.
While the sentiment around the sterling has been dominated by this rhetoric, the currency has had several modest increases to test resistance levels. However, the highs have been getting lower, depicting a dramatic bearish trend that wiped out all the election gains.
The pound has gained some traction against the USD since late Monday after the US Commerce Department said that new orders for key US-made capital goods increased only slightly last month, while shipments fell. Thus, business investment will likely drag down the US economic growth in the fourth quarter.
Orders for non-defense capital goods excluding aircraft rose only 0.1% last month as a jump in demand for appliances, electrical equipment, and components was offset by a drop in machinery orders. Boeing announced last week that it would halt manufacturing of its 737 MAX jet in January, citing fallout from the recent two crashes.
Nevertheless, the dollar will benefit from the optimism around the phase one trade deal to be signed between the US and China.
