GBP/USD has posted gains in Thursday trade. Early in the North American session, the pair is trading at 1.2963, up 0.40% on the day.
Pound rally continues
GBP/USD has not had a losing daily session since September 23rd, as the pound has taken advantage of a struggling US dollar. The pair is up 1.7% so far this week and is within striking distance of the symbolic 1.30 level, which was last breached on September 16th.
EU starts legal proceedings over Brexit
The torturous Brexit process has taken on yet another twist, as the EU has announced it is launching legal action against the UK after London refused to remove draft legislation that breaches the withdrawal agreement that both sides signed in 2019. The UK has admitted that sections of the Internal Market Bill breach the withdrawal agreement, but has argued that the bill is required in order to protect trade between different parts of the UK. An ultimatum from the EU to remove the bill expired on Wednesday, leading the EU to formally contest the bill. The British pound has not reacted negatively to the EU move, but if tensions over Brexit worsen, nervous investors could lose confidence in the pound.
The latest crisis between the EU and the UK has overshadowed the most recent British economic data. The second-estimate GDP for Q2 declined by 19.8%, which was upwardly revised from 20.4% in the initial estimate. The manufacturing sector continues to recover, as Manufacturing PMI came in at 54.1 in September, down from 55.2 beforehand. The index has been in expansionary territory for four straight months, reinforcing that the economy is recovering from the devastating economic impact of Covid-19.
- There is resistance at 1.2971, protecting the symbolic 1.30 level. Above, there is resistance at 1.3024
- There is support at 1.2835, followed by support at 1.2751
- The 10-day MA line, which is slightly below the pair, remains relevant
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