GBP/USD battles five-week top below 1.2700, focus on Brexit, US-UK trade talks
- GBP/USD hovers in a choppy range between 1.2685 and 1.2670, challenges June 16 high.
- US dollar drops to the lowest since March 10, EU leaders agree over 750 billion Euros of aid package.
- UK fisheries will be a tough nut to crack as European fisherman insists the same access to British waters.
- US Secretary of State Mike Pompeo arrived in London to discuss post-Brexit trade deal, 5G and China.
GBP/USD eases from the intraday high of 1.2685 to 1.2675, up 0.10% on a day, while heading into the London open on Tuesday. The pair seesaws in a choppy range following the run-up to multi-day high as key trade talks are set to begin from Tuesday. Even so, bulls remain hopeful as the US dollar refreshes 19-week low amid broad risk-on sentiment.
Risk-on is the key, post-Brexit trade talks awaited …
Global markets cheer the European policymakers’ agreement over 750 billion Euros of the aid package. The regional leaders manage to offer 350 billion Euros of loans and the rest as grants after five days of tough talks. On the other hand, the US Senators are also up for discussing another tranche of the stimulus. While the ruling Republican party is about to propose $1.0 trillion of an aid package, the opposition Democratic party prepares for over $3.00 trillion to term themselves as a better ruler.
Other than the hopes of further stimulus, coupled with the recently announced actual one, updates that the joint efforts of Oxford University and AstraZeneca are witnessing welcome results of a vaccine trial also favor the market’s risk-tone sentiment. Furthermore, the BOE’s Chief Economist Andy Haldane’s comments that the UK economy hit the floor in April suggested further recoveries. Though, his outlook for negative rates guarded the gains afterward.
Amid all these plays, the US 10-year Treasury yields drop 1.1 basis points to 0.609% while S&P 500 Futures and stocks in Asia pacific cheer the European Union (EU) Summit’s welcome results.
Moving on, the sixth round of the EU-UK Brexit talks will resume today after the previous disappointments. While the bloc leaders allege Britain for tough demands, updates from the UK Express suggest that the EU fisherman is pushing the regional leader to have the same access to UK waters after Brexit as they have. The same could give rise to a tough start to the already lingering talks, which in turn may weigh on the Pound.
On the contrary, talks between the British and American diplomats in London are likely to go smoothly due to their leaders’ bonding. However, comments over China and 5G will offer intermediate moves to the markets. Talking about the calendar, the US Chicago Fed National Activity Index for June, prior 2.61, could also entertain the pair traders.
Technical analysis
Not only June 16 top near 1.2690 but 200-day SMA close to 1.2705 will also challenge the Cable bulls ahead of opening gates for June month top surrounding 1.2815. Meanwhile, bears will fear of entering unless the quote drops below an ascending trend line from March 20, at 1.2433 now.