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GBP/USD nears 1.35 on Brexit optimism, eyes US core PCE

  • GBP remains bid as Brexit optimism overshadows weak consumer sentiment.
  • Eyes US core PCE

GBP/USD remained bid in Asia and extended gains to a fresh two-month high of 1.3480 as the absence of festive cheer as shown by the gauge of consumer sentiment was overshadowed by Brexit optimism.

The GfK consumer confidence index dropped by 2 points to -12 in November, its lowest since July 2016. The details revealed that households' willingness to make major purchase fell to its lowest level since Oct. 2014. Further, a survey by Lloyds Bank showed business confidence slipped this month and their economic optimism hit the lowest since June 2016.

However, markets are not paying any attention to the weak sentiment indices as investors seem convinced that a Brexit deal is in the works. It is believed that a quick deal would reduce uncertainty and boost consumer and business confidence.

Eyes core PCE

The Fed's preferred measure of inflation - core personal consumption expenditure (peace) is scheduled for release at 13:30 GMT. It is seen rising 1.4 percent year-on-year in October vs. previous print of 1.3 percent. 

Yesterday, the Q3 core PCE price inflation was revised up slightly to 1.4% y-o-y, from 1.3%. This helped the US 10-year treasury yield rise to 2.4 percent.

The yield may extend gains to 2.47 percent to 2.5 percent if the core PCE prints higher estimate, in which case the GBP/USD may find it hard to keep the bid tone intact.  On the other hand, a weak PCE figure could yield a move higher to 1.36.

GBP/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, "the pair retains its bullish tone in the short term and according to technical readings in the 4 hours chart, as the price is firmly above a bullish 20 SMA, while the Momentum holds above its 100 level, and the RSI indicator heads north around 65, its highest for this week."

Support levels: 1.3410 1.3380 1.3340  

Resistance levels: 1.3450 1.3490 1.3535

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