- A combination of factors causes an aggressive short-hedging move around GBP / USD.
- Hopes for a US fiscal stimulus boost risk appetite sentiment and weigh on the safe-haven USD.
- Barnier’s comments provided an additional boost to the British pound and continued to be supportive.
The British pound has captured some aggressive buying during the European session on Wednesday, leading GBP / USD to one-week highs around the 1.3065 region. At time of writing, the pair is slightly back towards the 1.3040 region, still positive on the day.
Following the price movement in both directions the day before, the pair managed to regain some positive traction on Wednesday, supported by prevailing selling bias around the US dollar. The latest optimism about additional US fiscal stimulus measures has continued to support market optimism, which in turn has weighed on the dollar’s safe-haven status against the British pound.
In addition to widespread USD weakness, GBP / USD has received additional boost after comments from EU chief Brexit negotiator, Michel Barnier, who said that a Brexit deal is within reach. Barnier has also been willing to discuss all issues on the basis of the legal text and has raised prospects for the resumption of the Brexit talks. This, in turn, has led to aggressive short hedging around the British pound.
Meanwhile, the latest sudden upward move could also be attributed to some technical buying above the key psychological level of 1.3000. Subsequent strength beyond the resistance of a one-week downtrend line, around the 1.3015-20 region, also appears to have contributed to the strong bullish move and could have set the stage for a new intraday bullish move.
With Brexit-related news acting as a sole driver of sentiment around the British pound, GBP / USD has had a rather subdued reaction to Wednesday’s UK consumer inflation figures.
Credits: Forex Street
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