After a frantic 24 hours the pound volatility remains high. The pound plummeted to monthly lows versus the euro and the dollar in the previous session, on rumours that Brexit talks were on the verge on collapse. Today the pound is rebounded versus the weaker dollar but has failed to hold onto those early gains.
With three weeks to go until Brexit, the pound is hovering around $1.2200. At these levels there is a sense that Brexit is not going to happen, at lest not yet, regardless of Boris Johnson’s do or die rhetoric. According to Bloomberg a gauge for UK currency market sentiment for the next week is at the highest level for four months – is this because traders are assuming Boris Johnson will be forced to seek an extension?
Pound trades will continue to jump from headline to headline.
On the other side of the equation expectations are low for the 13th round of US - Sino trade talk as actions from both sides suggest any truce could be a way off. The FOMC minutes are due later today, however we expect them to play second fiddle to trade talk headlines.
Levels to watch GDP/USD
Despite today’s spike, the pair trades below its 50, 100 and 200 SMA, with bearish momentum. Support can be seen at $1.22 prior to $1.2155. A break through here could see the pair drop towards $1.21.
On the upside, resistance can found at $1.2270, $1.2345 before $1.2390.
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