- Diminishing hopes for a last-minute Brexit deal sparks some aggressive selling around GBP / USD.
- A modest USD short hedging bounce contributes to the continued pullback from multi-year highs.
Intraday selling around the British pound has accelerated during the European session on Friday, dragging the GBP / USD pair back below the key psychological level of 1.3500, at new daily lows.
Having struggled to find acceptance above the 1.3600 level on Thursday, the pair has witnessed a pullback on the last day of the week amid a flurry of Brexit-related news. The British Prime Minister, Boris Johnson has suppressed hopes of a last-minute Brexit deal, saying the most likely outcome was for the UK to leave the EU without a deal..
Johnson has warned that no deal is likely to be reached unless the EU substantially changes its position on key issues, including fishing quotas. European President Ursula von der Leyen has acknowledged the differences and said that closing the gap in some areas, especially fishing, would be a big challenge.
Meanwhile, the EU’s chief negotiator, Michel Barnier, said on Friday that there is a possibility of reaching an agreement, but that the path to that agreement is very narrow. Less than two weeks before the end of the Brexit transition period on December 31, the not-so-optimistic comments have hit the British pound and turned out to be a key factor putting pressure on the GBP / USD pair.
On the other hand, Lack of progress on additional US fiscal stimulus measures has led to a short hedging move in the US dollar. This, in turn, has added to the intraday selling bias and has forced the GBP / USD pair to break four consecutive days of winning streak. The pair has now returned the positive move of the previous day to the highest level since May 2018.
Meanwhile, with Brexit talks kept on edge, investors could refrain from opening aggressive positions. This makes it prudent to wait for a strong continuation sell before confirming that GBP / USD has peaked in the near term and positioned for any further decline amid the absence of relevant economic releases in the market.
GBP / USD technical levels
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