The British pound is flying in the Monday session. GBP/USD is currently trading at 1.3368, up 1.14% on the day. In the European session, the pound climbed as high as 1.3445, before retreating back below the 1.34 level.
Brexit causing sterling volatility
The markets remain fixated on the Brexit talks, hoping to finally see the white smoke which will put a merciful end to this tortuous saga. The British pound had a miserable week as the negotiations remained at an impasse. Hopes that a high-level tête-à-tête between Prime Minister Johnson and EU Commission President Ursula von der Leyen would break the Brexit ice were dashed, and the pound slumped on fears that a Sunday deadline would spell the end of the talks. However, this artificial deadline proved to be about durable as the umpteeen deadlines which have come and gone. With the parties so close to deal, neither Brussels nor London really wants to walk away from a deal at this stage of the game. The markets breathed a huge sigh of relief and the pound has roared back on Monday.
We’ll get a look at tier-1 employment numbers out of the UK on Tuesday (7:00 GMT). Wage growth has improved for four straight sessions and the upswing is expected to continue, with a consensus estimate of 2.2 per cent. However, Claimant Count Change is expected to rise to 10.5 thousand and the unemployment rate is projected to rise to 5.2%. These releases could well be overshadowed by developments in the Brexit talks, but any unexpected readings could lead to further volatility from the pound.
- GBP/USD tested resistance at 1.3420 in the European session but couldn’t hold onto these gains. Above, there is resistance at 1.3514
- We find support at 1.3134, followed by a support line at 1.3040
- The pair punched past the 20-day MA line in the Asian session, which is a sign of an upswing
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