- GBP/USD has trended lower recently after failing to break above $1.34.
- Optimism that a Brexit trade deal will be achieved is keeping the pair broadly underpinned.
- Bulls are reluctant to push beyond 1.3400 in absence of further progress in talks
GBP/USD struck a wall at 1.3400before sellers drove the pair back to a low of 1.3320 in the European session. GBP was amongst the worst performers t of the G10 currencies on the day (with only NOK and SEK doing worse). .
GBP/USD price movement suggests bulls not ready to push beyond 1.3400 without progress in Brexit talks.
Even so, GBP/USD remains significantly up from the monthly low of 1.2850 set on 2 November. Although this is mainly a US Dollar weakness story following US President-elect Biden’s victory in early November and vaccine optimism along with an increasingly dovish sounding FOMC who are expected to tweak their bond buying programme in December. Fiscal stimulus from Congress also remains elusive.
GBP has also significantly outperformed the EUR and CAD (GBP/USD gained 3% on the month to CAD/USD’s 2.3% and EUR/USD’s 2.2% rise respectively). As growing optimism of a Brexit deal boosted the pair higher. Initially it was hoped that this week the deal would be finalised, but headlines have so far been far from upbeat.
Sterling traders appear to have shrugged off the downbeat headlines explaining why cable still trades over 1.3300. . Until evidence of a deal emerges, GBP/USD is likely to continue to feel uncomfortable close to 1.3400.