- GBP / USD drew some buying in the dips near 1.3000 amid a softer tone surrounding the USD.
- Political uncertainty in the United States, a modest rally in equity markets, undermined the dollar as a safe haven.
- Brexit uncertainties prevented the bulls from making aggressive bets and limited the upside for the pair.
The pair GBP/USD It rallied around 55-60 pips from the daily lows and spiked to fresh daily highs, near the 1.3060 region in the last hour, although it rapidly declined a few pips thereafter.
The pair continued to draw some buying on dips near the key psychological level 1.3000, or the support of the 200-day SMA and was being supported by a modestly weaker tone surrounding the USD. Despite the negative news about the second wave of coronavirus infections, the dollar struggled to gain significant traction due to growing wariness over the US presidential election.
Incoming polls have been indicating a solid lead for Democratic candidate Joe Biden over incumbent President Donald Trump. However, a narrow gap in certain key changing states fueled uncertainty about the actual outcome. This, in turn, kept the USD bulls on the defensive and was seen as a key factor that helped the GBP / USD pair break three consecutive days of the losing streak.
Aside from this, a modest rally in equity markets further undermined the dollar’s relative safe-haven status. However, slow progress in the US stimulus talks, coupled with concerns about the possible economic impact of the new coronavirus-induced lockdown measures, could limit optimism. This should continue to benefit the USD’s status as a global reserve currency.
The USD remained depressed during the early days of the US session and did not appear impressed by Tuesday’s release of stronger-than-expected US durable goods order data. In fact, major orders expanded 1.9% month-on-month in September, while orders without transportation increased 0.8% versus consensus estimates that point to growth of 0.5% and 0.4%, respectively.
Meanwhile, the upside for the GBP / USD pair is more likely to remain limited as investors await updates from the extended Brexit talks before making further directional bets. It should be remembered that the EU’s main Brexit negotiator, Michel Barnier, has extended his stay in London until Wednesday. The development was seen as a positive sign that raised hopes for a last-minute Brexit trade deal.
Investors, however, remain skeptical of a deal amid disputes over the tipping point of fishing. This eventually kept strong gains in check for the GBP / USD pair, which has now lost around 25-30 pips from daily highs and was last seen trading modest gains around the 1.3030 region.
Credits: Forex Street
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