GBP / USD returns initial gains and falls back to the 1.3350 region

• GBP / USD is struggling to hold onto early gains and is witnessing a modest intraday pullback.
• The not-so-optimistic comments about Von der Leyen’s Brexit weigh on the British pound.
• A weaker dollar helps limit the slide ahead of US macro data and FOMC minutes.

The pair GBP/USD it has rapidly retraced more than 50 pips at the start of the European session on Wednesday and has fallen to new daily lows, around the 1.3330 region, although it has lacked any continuation selling. At time of writing, the pair remains slightly negative on the day around the 1.3350 level.

The pair has struggled to capitalize on its initial rally and has found new sales near the region of 1.3385, falling into negative territory at the start of the European session. The strong setback has occurred after not-so-optimistic Brexit-related comments from the President of the European Commission, Ursula von der Leyen.

Von der Leyen has warned that a Brexit deal is far from safe, as disagreement over access to Britain’s fishing waters continues to block progress. In addition, he added that there has been progress in the Brexit negotiations, but not enough as to produce significant progress on key points, including state aid rules.

With very little time before the Brexit transition period ends on December 31, the news has weighed on the British pound and they have turned out to be one of the key factors behind the sudden drop in the GBP / USD pair. But nevertheless, the prevailing selling bias around the US dollar has offered some support and it has helped limit deeper losses in the pair.

Optimism about progress on COVID-19 vaccines and the smooth start of President-elect Joe Biden’s transition to the White House, has continued to support market optimism. This has been evident by a positive tone in equity markets, which continues to weigh on the safe-haven US dollar.

From a technical perspective, repeated failures of the GBP / USD pair below the 1.3400 level could be seen as signs of bullish exhaustion. That said, the lack of follow-up sales and the emergence of some lower level buying supports prospects for additional earnings. This warrants some caution before opening aggressive new directional positions.

Market participants are now waiting for a lot of top-tier US macro data to get some short-term trading opportunities. In the economic calendar of the United States on Wednesday, the publications of the preliminary report of GDP (second estimate), durable goods orders, initial weekly jobless claims and the final index of consumer sentiment from the University of Michigan for November.

However, the key focus will be on the minutes of the last FOMC meeting, which will be analyzed in search of the possibility of further easing of monetary policy by the Fed in December. The Fed’s Policy Outlook Will Influence USD Price Dynamics, which together with the new Brexit updates, should help investors determine the short-term direction of the GBP / USD pair.

GBP / USD technical levels