- GBP / USD welcomes December with slight gains, after achieving its highest gain in four months in November.
- Concerns about the economic strength of the United States and hopes for additional stimulus weigh on the dollar.
- The Brexit talks come to the end of the game with no clarity on the key obstacles, the Irish prime minister remains hopeful.
- UK and US manufacturing PMIs, along with testimony from Fed Chairman Powell, will be key. Updates on Brexit may lead the price action.
The GBP/USD It retreats slightly from the intraday high of 1.3366 while trading near 1.3360 during the Asian session on Tuesday. The pair achieves intraday gains of 0.25% at time of writing, while Bulls celebrate declines in US dollar ahead of further Brexit update and release of manufacturing PMI from the UK for November.
The US dollar DXY index bounces off the lowest level since April 2018, reached the day before, as US officials highlight concerns about economic recovery while pushing for an additional aid package for coronavirus. Whether it’s Fed Chairman Jerome Powell or US Treasury Secretary Steve Mnuchin, not forgetting the Chairman of the Federal Reserve Bank of Dallas, Robert Kaplan, they all showed discretion about the likelihood that the larger economy the world loses recovery if the long-awaited stimulus falls short.
Aside from the hopes of encouragement, expectations of the next arrival of the vaccine also favored market sentiment. Moderna recently submitted an emergency request to the United States Food and Drug Administration (FDA) to use its anti-covid drug.
On another front neither the UK nor the European Union are willing to step back on key issues such as fisheries, a level playing field and governance. On the contrary, British Prime Minister Boris Johnson reiterated that the British are refraining from switching and at the same time putting pressure on British companies to prepare for the no-deal exit. Still, Irish Prime Minister Micheál Martin said on Tuesday that “there are options for a Brexit trade deal.”
Investors can also rejoice in the recent decline in UK covid numbers. “Britain reported 12,155 new coronavirus cases and 215 new deaths on Sunday within 28 days of testing positive for COVID-19, government data showed. Both measures are below Saturday, when there were 15,871 new cases and 479 deaths, ”Reuters said.
Looking ahead, Brexit news will be the key, while second readings of US and UK manufacturing activities for November may offer an additional filter. It should also be noted that COVID-19 updates and vaccine news, along with further stimulus developments in the US, may also move the price action of the pair.
GBP / USD technical analysis
The inverted hammer candle on Monday’s daily chart, coupled with the bullish MACD and the ability of the pair to stay above the 10-day SMA, steers GBP / USD buyers towards the November high near 1.3400.
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