GBP/USD falls on a key support after 10 day streak
GBP/USD falls to 1.2563 on the back of relative strength over the past 2 weeks. General risk sentiment fueled the rally. However, fears of a second wave abruptly stopped the rally.
With the recent safe haven characteristics, the USD has been exhibiting over the past, it is not surprising that the USD has been strengthening across the board. Pair this with little substantial news on Brexit, and the drop in the GBP/USD is substantiated.
Strength in the USD also came from Retail consumer data from the commerce department posting record numbers, jumping 17.7% in May – with analysts originally forecasting an 8.5% increase. This shows that the backbone of the US economy, the consumer, is again providing optimism for the US markets.
This is on the back of Jerome Powell testifying to congress that the US government will likely need to spend more money to ensure the US can reach a full economic recovery. However, he maintained a cautious stance about the economy. This may be advantageous for Trump, as he may quote Powell for being supportive of an $1 Trillion Infrastructure bill the President is trying to pass through congress.
GBP/USD may still be under pressure due to Brexit and second wave fears
Weakness in the GBP may be attributed to Brexit talks progressing slowly, with Prime Minister Boris Johnson saying that the EU and the UK were “not far apart” relating to the country and the Unions relationship. The Brexit saga has been ongoing since 2016, and has pushed the GBP/USD has been ranking lower since the announcement.
Traders should watch the key psychological 1.255 level, as it may provide an entry point for a reversal.
