- GBP/USD lacked direction on Tuesday due to numerous diverging factors.
- Brexit uncertainties & tighter lockdown measures in the UK undermined the pound.
- US stimulus optimism dragged on the safe-haven USD offering some support.
The GBP/USD was driven by a combination of diverging factors yesterday. Optimism surrounding additional US fiscal stimulus supported the upbeat market mood. This weighed on demand for the safe haven US dollar boosting GBP/USD. The move higher lacked follow-through,and soon ran out of the steam amid ongoing Brexit uncertainties.
The European Commission has said that it is willing to intensify trade talks with the UK. Meanwhile the UK PM’s spokesperson said that talks would only restart if there was a fundamental change in approach from the EU. Trade talks between the UK and the EU had been in deadlock amid disagreements over fishing access and competition issues. Separately, Britain has also imposed fresh lockdown measures to stem the second wave of the covid, which took its toll on the British pound.
GBP/USD declined 70 pips from the day’s high but found some support around 1.2900 on hopes of a pre-election US stimulus package. US President Trump said that he was willing to accept a larger bill, sparking a selloff in selloff on the US bonds pushing the yield on the benchmark 10-year bond to aped four-month highs, pressurising the greenback boosting GBP/USD in the Asian session on Wednesday.
GBP/USD has rallied back to the 1.3000 psychological mark shrugging off mixed UK consumer inflation figures. UK CPI rose+0.4% MoM in September versus+0.5% expected. The annual rate matched forecasts at 0.5%. Core CPI (excluding volatile food and energy items) printed +1.3% YoY versus +0.9% rise recorded in August, in line with expectations. With no more UK economic data due incoming Brexit headlines will continue to drive sentiment surrounding the British pound. On the other hand, US stimulus developments and coronavirus headlines will influence the USD price dynamics