GBP/USD climbs back above the 1.3400 level to start the session
Amid some Brexit angst yesterday, the pound fell and cable was dragged down from 1.3440 to test the support region around 1.3290-00.
Buyers held and managed a solid rebound, which was also helped by dollar weakness.
That is seeing price claw its way back above the key hourly moving averages (now @ 1.3355-57) as buyers establish a more bullish near-term bias again.
The push now extends towards 1.3400 with gains to be limited closer to the region around 1.3430-40 for the time being. The 1 September high @ 1.3483 is also one to watch.
Barnier and Frost are expected to update on the state of play today and if not, tomorrow surely so keep an eye out for that as the talks in London near a conclusion.
The price action in the pound shows that this is a market itching to buy the quid, so positive Brexit rumblings could help to propel the pound higher but just be wary of any exacerbated optimism if both sides fall back on some technicality instead.
My thoughts from last week:
Otherwise, we are likely to see the can kicked down the road again and I firmly believe that at the end of the day, both sides will fall back on some technicality to sell a compromise.
A skinny deal excluding the three key outstanding issues (instead postponing them) will allow Boris Johnson to "technically" stick with a Brexit on 1 January 2021 while the EU doesn't have to move its red lines and be made to look worse off from any deal.
The initial flush higher in the pound could be responding to some "relief" that there is a "deal", but in fact the lack of key details agreed could come back and bite at sterling once the euphoria settles down; that is if we do observe such an outcome above.