- GBP / USD witnessed an aggressive short hedging move on Wednesday and rallied to weekly highs.
- The incoming headlines revived hopes for a last-minute Brexit deal and provided a strong boost.
- COVID-19 vaccine optimism / US stimulus hopes undercut the USD and continued to act supportive.
The pair GBP/USD added to its strong intraday gains and shot to fresh weekly highs, around the 1.3460-65 region during the mid-European session.
The pair built on this week’s solid bounce from the 1.3225 region, or the two-week lows touched earlier this week, and caught some aggressive offers on Wednesday. Strong positive intraday momentum followed comments from UK Cabinet Minister Michael Gove saying there may be room for a compromise on fishing rights.
Furthermore, German Chancellor Angela Merkel hinted that the EU will be willing to compromise on equal terms. Headlines raised the prospects of a Brexit deal and forced investors to undo their bearish bets ahead of a key summit between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen.
Aside from some positive developments around the Brexit saga, the emergence of some new selling around the US dollar further prompted traders to undo their bearish bets. The latest optimism about COVID-19 vaccines and hopes for more US fiscal stimulus boosted investor sentiment, which, in turn, kept the USD bulls on the defensive.
With Wednesday’s strong bullish move, the GBP / USD pair has reversed the losses recorded over the past three trading sessions and appears ready to point back to regain the key psychological level of 1.3500. In the absence of major economic releases to move the market, the incoming Brexit-related headlines will continue to infuse some volatility around the sterling cross.
Technical levels
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