GBP/USD gains traction on Brexit headlines, rises toward 1.31

• The EU is reportedly redrafting the Irish Brexit protocol.
• The US Dollar Index extends losses below 95.
• BoE is scheduled to announce its monetary policy decision on Thursday.

The GBP/USD pair gathered bullish momentum in the last hour and rose to a fresh session high of 1.3080 as the latest Brexit headlines boosted the demand for the pound sterling. As of writing, the pair was trading at 1.3065, adding 0.25% on the day.

Earlier today, James Slack, British Prime Minister Theresa May's spokesman, said that they were focused on taking forward the Chequers plan and did not want to have a customs border down the Irish Sea. Slack further added that the government looked at options for Irish border and decided the Chequers was the only viable option. In line with Slack's comments, Bloomberg recently reported that Europen officials were redrafting the Irish Brexit protocol to "appease to the UK."

The sharp rise witnessed in the pair dragged the US Dollar Index to its lowest level in 12 days at 94.75. At the moment, the index is down 0.35% on the day at 94.78.

On Thursday, the BoE is going to announce its policy rate decision, which is expected to stay unchanged at 0.75%. Commenting on the potential impact of tomorrow's event on the GBP, "our base case implies modest downward pressure on GBP after a decent run in recent weeks. A largely unchanged outcome suggests sterling will remain contained within recent ranges as investors remain focused on larger concerns elsewhere,” TD Securities analysts said.

Technical levels to consider

On the upside, the pair could face the first technical resistance at 1.3115 (100-DMA) ahead of 1.3170 (Jul. 31 high) and 1.3215 (Jul. 26 high). Supports, on the other hand, are located at 1.3000 (psychological level), 1.2950 (50-DMA) and 1.2895 (Sep. 10 low).