GBP/USD dives to fresh session lows, below mid-1.2900s
- GBP/USD witnessed heavy selling on Thursday and eroded a major part of the overnight gains.
- A strong pickup in the USD demand was seen as a key factor behind the sharp intraday fall.
- The incoming Brexit-related headlines will influence the sentiment surrounding the British pound.
The intraday buying around the greenback picked up pace during the early European session and dragged the GBP/USD pair back below mid-1.2900s in the last hour.
The pair came under some renewed selling pressure on Thursday and has now retreated over 100 pips from the overnight swing highs, around the 1.3060-65 region. The pullback was exclusively sponsored by resurgent US dollar demand. The global risk sentiment took a hit on the back of concerns about a rapid rise in new coronavirus cases and fading hopes of additional US fiscal stimulus measures. This, in turn, boosted the greenback's safe-haven status.
On the other hand, the British pound failed to capitalize on the overnight strong positive move led by reports that the UK will not abandon Brexit talks immediately. In the latest Brexit-related developments, the draft from the EU summit conclusions, as reported by Reuters, the EU leaders will authorize continuation of negotiations with Britain on a trade deal in coming weeks. The headlines, however, did little to impress the GBP bulls.
Apart from a broad-based USD strength, worries about new coronavirus restrictions in the UK and the possibility that the Bank of England could introduce negative interest rates exerted some additional pressure on the GBP/USD pair. The latest leg of a sudden fall over the past hour or so could further be attributed to some technical selling on a sustained weakness back below the key 1.3000 psychological mark.
In the absence of any major market-moving economic releases from the UK, the incoming Brexit-related headlines will drive the sentiment surrounding the sterling. This, along with the broader market risk sentiment will influence the safe-haven USD and further contribute to produce some meaningful trading opportunities. Later during the early North American session, the US economic docket will be looked upon for some impetus.
Technical levels to watch