- GBP / USD rally limited to 1.2940, turns negative towards 1.2900.
- The second lockdown in the UK weighs on the pound.
- GBP / USD is expected to be under pressure this week – UOB.
The British pound’s attempted recovery from session lows at 1.2855 during the London session on Monday has been capped at 1.2940. The pair has dropped again during the North American session and is testing levels below 1.2900 at the time of writing.
A second UK lockdown weighs on the pound
The pound opened the week on the back foot, reversing the moderate recovery on Friday when Prime Minister Boris Johnson announced this weekend the introduction of a month-long lockdown. The rapid spread of the second wave of COVID-19, which reaches more than 20,000 registered infections per day, has led experts to warn about the possibility of overcoming the worst-case scenario of 80,000 victims this winter.
The downside moves, however, remain contained so far, with the pound backed by market hopes for a Brexit deal. The lack of news from the negotiations as European and British representatives work to break out of the stalemate on the toughest issues is fueling expectations of a last-minute deal that will prevent a disorderly exit from the Union.
Earlier today, the British manufacturing PMI showed that British manufacturing activity lost momentum in October, with consumer goods producers experiencing a stronger slowdown amid rising COVID-19 cases. However, the impact of these figures on the GBP has been toned down.
GBP / USD is considered to be under bearish pressure this week – UOB
On the technical side, UOB’s currency analysis team sees the risk to the pound skewed to the downside, with key support at 1.2845: “The bearish momentum has improved further but still looks lackluster for now. From here, the GBP is considered to be under slight downward pressure and could gravitate towards the main support at 1.2845. On the upside, a break of 1.3030 would indicate that the current slight downward pressure has eased. ”
Credits: Forex Street
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