GBP/USD: Off monthly lows, eyes 1.2400 ahead of Brexit talks
- GBP/USD extends recovery gains from 1.2315 ahead of the key day.
- EU-UK policymakers aim for “intense talks” in Brussels, Tories keep the heads high while bloc leaders want compromise from Britain.
- Risk-tone remains heavy amid coronavirus woes, local lockdowns in focus at home.
- Hopes of UK PM Johnson’s boost to infrastructure spending act as an additional catalyst.
GBP/USD takes the bids near 1.2370, up 0.24% on a day, while heading into the London open on Monday. The Cable recently bounced off the monthly low amid the US dollar pullback. Though, the post-Brexit trade deal negotiations between the UK and European Union (EU), starting from today, will be the key for the Cable traders. Additionally, the recent risk of in the coronavirus (COVID-19) resurgence also weighs on the market sentiment and becomes important to watch too.
A team of 20 British diplomats headed by the Chief Brexit negotiator David Frost reached Brussels on Sunday for the “intense talks” with the bloc leaders. UK PM Boris Johnson’s latest visit to the regional headquarters reignited hopes of fastening of departure talks and a trade deal when both the neighbors bid adieu on December 31, 2020. However, issues like fishing, EU’s judicial power post-Brexit and “level playing field” are some of the tough nuts to crack for the negotiators.
Considering the issue, CGTN came out with the news suggesting that a German Member of the European Parliament (MEP), Terry Reintke, said that the UK government must compromise to reach the Brexit deal. On the contrary, the Telegraph said that senior Conservative Members of the Parliaments (MPs) urge UK negotiators to reject Brexit 'compromise'.
Other than the Brexit talks, which are likely to remain in the headlines for the day, the virus issues also put Britain in the spotlight. The reason is the talks of local lockdowns in Leicester. On a broader frame, the British Department of Health and Social Care announced an increase of 36 people who have died on Saturday afternoon, bringing the total coronavirus-related death toll in the country to 43,550. Further, there are additional 901 COVID-19 patients in the nation fueling the total numbers to 311,151.
Elsewhere news that UK PM Johnson will unveil an additional $1.23 billion to build the first 50 projects comprising schools offered additional directives to the GBP/USD prices. Additionally, the UK-China tussle and fears of the US tariffs become the extra notes to watch.
Market’s risk-tone remains pressured as the virus cases surge in the US and China’s Anxin County called for lockdown restrictions as same as Wuhan did during the early outbreak days. Amid these catalysts, the US 10-year Treasury yields stay near the monthly low of 0.64% whereas stocks in Asia and the US stock futures print losses as we write.
Looking forward, the Brexit updates will be the key for the pair traders to watch. However, that doesn’t mean COVID-19 news and UK politics will lose its importance. Also important will be the US Dallas Fed Manufacturing Business Index and Pending Home Sales.
Technical analysis
Oversold RSI conditions on the four-hour chart favor further pullback. However, the 50-day EMA level near 1.2415 could question the immediate upside. Meanwhile, May 29 top near 1.2300 could offer intermediate halts ahead of the previous month’s low near 1.2075.