GBP/USD: Upside remains capped near 1.3070 amid Brexit stalemate
- Bulls remain wary amid a lack of progress on Brexit talks, as talks with Labour resume today?
- European leaders demand a reason for the prolongation, May seeks for shorter Brexit extension.
- Technical set up points to bearish bias, as the focus remains on Wednesday’s EU Summit, FOMC minutes.
The GBP/USD pair stalled its recovery near 1.3070 and entered a phase of consolidation in the European session, as the bulls await a breakthrough on the Brexit talks between the UK PM May and the opposition Labour Party Leader Corbyn, as the talks resume later today.
In this regard, the UK Foreign Secretary Hunt was quoted as saying that the Brexit talks between both the leaders are not going to be easy, pleasing the GBP sellers further. However, the UK Labour Brexit Spokesman Starmer said that the talks are not scheduled today.
The Cable also faces a double whammy as the European leaders remain divided on a potential longer Brexit extension, as they call for an extension until March 2020. In the view of Yohay Elam, Senior Analyst at FXStreet, “Germany is the "good cop" with Chancellor Angela Merkel showing empathy, and France is the bad cop, with President Emmanuel Macron taking a tough stance despite his country's vulnerability to a hard-Brexit due to deep commercial ties.”
The spot remains vulnerable and could retest the 1.3000 level amid a lack of clarity on the Brexit issue while the EU Summit on this Wednesday, April 10th could help end the Brexit impasse. For now, it looks that the UK will exit the EU this Friday without a deal, with increased Brexit angst to weigh negatively on the GBP.
Meanwhile, a broadly weaker US dollar amid negative Treasury yields, fuelled by risk-aversion, continues to lend some support to the GBP/USD pair. Markets closely watch out for fresh Brexit developments and the US factory orders data for near-term trading opportunities.
GBP/USD Technical Levels