- GBP / USD came under renewed selling pressure on Tuesday amid a rebound in USD demand.
- Lack of progress in post-Brexit trade negotiations further contributed to intraday sales.
- Relatively tight liquidity conditions prevented traders from placing aggressive bets ahead of the US data.
The pair GBP/USD it rallied around 90 pips from mid-European session lows around the 1.3360 region, though it lacked a solid track.
The pair was unable to capitalize on the previous day’s strong bounce of over 300 pips and witnessed some selling during the first half of Tuesday’s action. The discovery of a new coronavirus variant and the imposition of new lockdown / travel restrictions in the UK continued to benefit the safe-haven US dollar. This, in turn, was seen as a key factor putting pressure on the GBP / USD pair.
The British pound was further pressured by headlines that the EU has rejected the UK’s latest proposal on fisheries, which remains a key point in post-Brexit trade negotiations. In other developments, UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen had a phone call yesterday in an attempt to reach a compromise on fisheries.
However, the fact that there has been no change in the status quo since the weekend, illiquid conditions leading up to the holidays prevented traders from making aggressive bets and helped limit the downside. The GBP / USD pair managed to attract some buying on the dips at lower levels, but struggled to take advantage of the momentum and the upside remained limited near 1.3450, which should now act as a key point.
Moving forward, traders now await the release of the final version of the US Q3 GDP report. The US economic agenda also includes releases from the Richmond Manufacturing PMI, the Consumer Confidence Index. Conference Board and existing home sales. Apart from this, the broader market risk sentiment will influence the USD price dynamics and produce some trading opportunities around the GBP / USD pair.
Technical levels
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