GBP/USD remains capped by 1.3300 ahead of emergency Brexit meeting

The GBP/USD pair failed to take out 1.33 handle on several occasions in Asia, now gyrating in the familiar range near 20-DMA at 1.3288, as the main risk event for today remains the emergency meeting called by the UK PM May in Brussels later today.

GBP/USD: Political to drive the GBP markets

Having peaked near 1.3340 last Friday, the spot corrected lower to 1.3275 levels, before finding fresh support from the latest headlines, citing that the UK PM May and Brexit Secretary, David Davis', will make an 'emergency' trip to Brussels, in order discuss on the Brexit deadlock with Michel Barnier, the EU's chief negotiator, and Jean-Claude Juncker ahead of the EU summit.

Meanwhile, easing Brexit worries, as found by a Deloitte survey, combined with risk-on sentiment, fuelled by higher Asian equities and oil prices, also keep the sentiment buoyed around the risk-currency GBP. More so, a surge in the UK October HPI and narrowing monetary policy divergence between the Fed and BOE, further collaborates to the renewed upside seen in Cable since last Friday.

The chances of a Dec Fed rate hike are seen dwindling, in the wake of downbeat US inflation and retail trade reports, while dovish Fedspeaks also point towards rising inflation concerns, which weighs down the Fed rate hike prospects. On the other hand, the BOE remains poised to hike rates in Nov, as already priced-in by the money markets.

All eyes now remain on the Brexit meeting and a slew of key UK macro events due later this week, including the CPI, employment and retail sales data.

GBP/USD Technical View

Haresh Menghani, Analyst at FXStreet noted: “A convincing break below 1.3250-45 immediate support is likely to accelerate the fall even below the 1.3200 handle towards 23.6% Fibonacci retracement level support near the 1.3175 region ahead of the 1.3130-20 region. Alternatively, a strong follow through buying interest beyond 1.3340 immediate strong hurdle would is likely to lift the pair towards the 1.3400 handle en-route 61.8% Fibonacci retracement level near 1.3415-20 area.”