- GBP / USD witnessed some volatility in reaction to British Prime Minister Johnson’s Brexit-related comments.
- The pair found some support after Johnson said he will not walk away from the negotiations.
The pair GBP/USD it quickly rallied over 50 pips from the mid-European session dip to the week-long lows at 1.2863 and now appears to have stabilized in neutral territory, just above 1.2900.
The pair was unable to capitalize on its initial rally, instead witnessing some aggressive selling near the 1.2960 region in reaction to Brexit-related comments from UK Prime Minister Boris Johnson. Johnson said he would pursue a no-deal Brexit unless there was a fundamental shift in approach from the European Union.
Johnson’s call to prepare for a no-deal Brexit took its toll on the British pound and caused the GBP / USD to plummet by around 100 pips. Johnson also clarified that he is not completely walking away from the negotiations. This, in turn, was seen as a key factor that helped limit deeper losses for the pair.
Once again, the pair showed some resistance before falling to 1.2850 and was supported by a weaker tone around the US dollar. A slight improvement in global risk sentiment, as evidenced by signs of a positive opening in US equity markets, undermined perceived demand for the dollar’s safe haven.
However, concerns that a sharp rise in new coronavirus cases could lead to further lockdown measures and hamper global economic recovery extended some support to the USD’s status as a global reserve currency. This could further help limit any uncontrolled rally in the GBP / USD pair, at least for now.
Regarding the US data, retail sales in September in the US showed a rise that exceeded expectations in all areas. Overall sales rose 1.9%, above the 0.7% market consensus and marking an acceleration from the 0.6% rise in August. The US economic agenda also includes the release of industrial production data and the preliminary estimate of Michigan’s consumer sentiment index for October. This, coupled with the broader market risk sentiment, should help traders seize some significant opportunities on the last day of the week.
Credits: Forex Street