GBP/USD: Off 20-week low, UK PMI, Brexit deal negotiations in focus
- GBP/USD holds on to recovery gains from the multi-month low.
- The EU-UK policymakers will officially begin the post-Brexit trade deal negotiations in Brussels, “level playing field”, fisheries remain as the key concerns.
- UK/US PMIs, coronavirus headlines continue to offer intermediate moves.
GBP/USD recovers 0.06% to 1.2830 from the mid-October 2016 lows, flashed on Friday, while heading into the London open on Monday. While risk reset seems to have been behind the latest pullback, the Cable traders will closely observe the official Brexit trade deal negotiations, starting from today, as well as official PMIs from the UK and the US for near-term directions.
During his public appearances at the weekend, the UK PM Boris Johnson was cited by the UK Mirror saying that it is likely that the Covid-19 strain of the coronavirus will spread a "bit more" on the day the number of confirmed cases jumped from 23 to 35. Following that, the British health secretary Matt Hancock conceded plans to isolate cities, if necessary, to stop the spread.
On the other hand, the US policymakers showed readiness for tax cuts and push for Fed rate cuts to counter the deadly COVID-19. As per the latest update, the second death has been announced from the US.
That said, the risk-tone remains sluggish with the US 10-year treasury yields recovering from the record lows to 1.0846% whereas most Asian shares reading benefits of the risk reset.
At the political front, the UK PM Johnson backed Secretary Priti Patel, as per the BBC, who was alleged to bully ex-top civil servant in her department.
Moving on, the UK’s Brexit team led by the key negotiator David Frost will reach Brussels for the start of EU-UK post-Brexit trade negotiations. The 10-groups’ team will discuss everything from fishing to financial services, also the EU laws, to have a deal by the end of this year. The negotiations will take place once every two-three weeks, as per the BBC, to have a base plan ready, failing to do so by June-end can push Tories towards no-deal Brexit.
Additionally, February month activity numbers from the UK and the US will also be important to determine near-term trade directions. Though, major attention will be given to the coronavirus headlines.
The pair remains below the key short-term resistance comprising 200-day EMA and 50% Fibonacci retracement of October-December 2019 upside, around 1.2855/60. That said, 61.8% Fibonacci retracement level of 1.2700 acts as the immediate support ahead of September 2019 high close to 1.2580. On the upside, a descending trend line from February 13 near 1.3000 will be on the bulls’ radars of GBP/USD prices manage to cross 1.2860 on a daily closing basis.