GBP/USD: Brexit hits the brakes on a break above 1.30, Trump is not helping either
Maroš Šefčovič – a name most traders cannot pronounce – is impacting the pound in an adverse manner. The Slovak politician said that Britain´s Internal Market Bill is a “heavy blow to trust” and that full and timely implementation of the Withdrawal Deal is “not debatable.” As the Vice-President of the European Commission for Interinstitutional Relations, he has knowledge of talks and influence on sterling.
These comments take the wind out of optimism that sent GBP/USD to 1.30 earlier. Chief EU Negotiator Michel Barnier is in London for fresh talks, following fresh impetus from leaders. The silence was bliss for the pound – until it ended. Additional comments by politicians on both sides of the Channel are set to rock the currency.
Sterling is also suffering from rising COVID-19 cases in the UK, with concerns that London may undergo harsher restrictions and perhaps a lockdown. An Excel error was responsible for the omission of some 16,000 cases from the register, serving as another embarrassment for Prime Minister Boris Johnson’s government. Any announcement of further measures could weigh on the pound.
On the other side of the pond, President Donald Trump left the hospital and made a triumphant comeback to the White House. Despite the Commander in Chief’s defiant message – and ceremonious removal of his face mask – his doctors said he is not out of the woods.
Opinion polls suggest Trump is trailing challenger Joe Biden by a sizable margin of around 8% on the national level and also significant leads in battleground states. A Monmouth poll for Pennsylvania released on Tuesday will be closely watched.
Investors seem to focus more on fiscal stimulus than the elections, at least for now. Speaker of the House Nancy Pelosi and Treasury Secretary Steven Mnuchin will speak again after a long phone call on Monday. Markets are cautiously optimistic that Democrats and Republicans can bridge the gap and sign off a multi-trillion relief package. Recent signs have shown that recovery is slowing down.
Jerome Powell, Chairman of the Federal Reserve, will speak about the economy later on. While he will likely reiterate the pledge to keep rates at zero for the next couple of years, the world’s most powerful central banker is unlikely to commit to additional bond buying. Powell would be reluctant to intervene four weeks ahead of the elections.
Overall, politics remain center stage, with a minor role for Powell.
GBP/USD Technical Analysis
The 1.30 level is proving hard to break. The round number limited cable’s advance on Tuesday and also in mid-September. Moreover, the 200 Simple Moving Average on the four-hour chart is zeroing in on that figure.
Other are upbeat – momentum is to the upside, the Relative Strength Index is not indicating overbought conditions and the pair is trading above the 100 and 200 SMAs.
Looking above 1.30, resistance is at 1.3050, followed by 1.3145, and 1.3175.
Support is seen at 1.29, which was a low point earlier , followed by 1.2840 and 1.28.