GBP/USD Back More Than 50 Pips From Daily Highs

The GBP/USD pair quickly pulled back around 50-60 pips during the early American session, although it has still managed to hold on with modest daily gains around the 1.2880-85 zone.

As investors took in the recent events surrounding the Brexit saga, the pair gained traction for the second straight session on Tuesday. Moreover, it rebounded further from seven-week lows. The positive momentum received support from strong intraday selling around the US dollar. It received a further boost following the release of mostly positive UK job details.

The latest optimism about a possible vaccine for the highly contagious disease coronavirus continued to support market optimism. This was evident by bullish trade sentiment around global equity markets. Which undermined the dollar’s relative safe-haven status and continued to support the strong offered tone surrounding the GBP/USD pair.

The British pound received support from macroeconomic data from the UK. The data showed the number of people claiming unemployment-related benefits hit 73,700 rather than 100,000. The unemployment rate for the three months through July rose to 4.1% from 3.9%.

Investors Could Refrain from Making Aggressive Bets Ahead of Central Bank Events

In the US, the Empire State Manufacturing Index rose more than expected to 17 in September compared to 3.7 previously. The disappointing release of US industrial production figures was seen as a critical factor that kept any further gains limited for the USD. 

Market fears have been growing that Britain may exit the EU at the end of the transition period. Thus, triggering new sales at higher levels. An initial parliamentary vote on the controversial UK bill, which violates the Brexit deal with the EU, removed its first hurdle in the House of Commons on Tuesday.

The EU has already warned that passing the legislation would lead to the collapse of the negotiations. This increases the possibility of a no-deal Brexit. As a result, it requires some caution before confirming that the recent sharp pullback from near the key psychological 1.3500 level has now ended.

Investors could also refrain from making aggressive bets ahead of key central bank events this week. The FOMC will declare its monetary policy decision on Wednesday. This will be followed by the Bank of England’s policy update on Thursday. That should help traders determine the next directional move for GBP/USD.

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