- GBP / USD once again struggled to capitalize on its intraday rally to the 1.3400 area.
- Brexit anxieties prevented investors from making further bullish bets and limited the pair’s advantages.
- Subdued demand for the USD could help limit the slide amid weak liquidity conditions due to the holidays.
The GBP / USD pair quickly retraced around 50 pips during the first European session and refreshed the daily lows, around the 1.3355-50 region in the last hour.
The pair continued its struggle to overcome a key hurdle near the 1.3400 round mark and witnessed a modest intraday pullback on Thursday amid lingering Brexit-related uncertainties. In recent Brexit-related headlines, British Finance Minister Rishi Sunak said negotiations are still ongoing and he remains hopeful a deal can be reached.
The comments, however, did little to impress bull traders in the absence of significant progress on key points: the so-called level playing field, fisheries and state aid rules. It is worth reporting that European Commission President Ursula van der Leyden said on Wednesday that disagreement over access to Britain’s fishing waters continues to block progress.
On the other hand, British Prime Minister Boris Johnson reiterated that the UK’s position on fisheries has not changed and that they will not ask for more time to negotiate the trade agreement with the European Union. With very little time left before the Brexit transition periods ended on December 31, the deadlock turned out to be a key factor limiting the upside for GBP / USD.
Despite Brexit anxiety, the downside remains muffled, at least for the moment, amid the latest optimism about a possible vaccine for the highly contagious coronavirus disease. This, coupled with a subdued demand for the US dollar, extended additional support to the GBP / USD pair. The US dollar fell to its lowest level in more than two months amid speculation of further easing by the Fed.
Data released Wednesday showed an unexpected jump in initial weekly jobless claims, suggesting that the imposition of new COVID-19 restrictions was undermining the job market recovery. Added to this, the minutes of the FOMC meeting on November 4-5 revealed that lawmakers debated a number of options to modify the bond purchase program to support the economic recovery.
Meanwhile, investors are likely to refrain from making aggressive bets and prefer to wait for new Brexit updates to be updated before positioning themselves in a firm direction. Additionally, relatively tight liquidity conditions following the Thanksgiving holiday in the US leave the pair at the mercy of incoming Brexit headlines amid the absence of market-moving economic releases.