British pound attempted a recovery on Monday and reached the highest level since July; however, the upside failed to gain traction. GBP bulls seem to have bumped into a brick wall on the approach to $1.2350 despite some positive developments on Brexit front.
Speaking at a press conference with the Irish leader Leo Varadkar, the U.K. Prime Minister Boris Johnson pointed out that he would prefer to strike a Brexit deal by October. This positive stance helped to ease concerns about hard Brexit and improve market sentiments. Traders that expected a disorderly no-deal Brexit on October 31 rushed to close their short positions and thus pushed GBP price off the recent lows.
Notably, GBP also gained support from better-than-expected macroeconomic data published on Monday. Thus the recent report on Industrial Production registered a minor growth (+0.1% m/m) in July, while the market expected a decrease (average forecast -0.3% m/m). Trade balance edged higher to -9.144B in July from -8.900 billion in June; however, the market expected -9.500 billion. All-in-all, the recent statistics dispelled the fears about an imminent recession in the British economy.
Looking forward, a lot of negative Brexit-related developments have been already priced-in by the market. It means that the coin has drained its bearish potential for the time being. Provided the Brexit delay bill gets royal approval, the risks of a messy Brexit will diminish significantly, creating a positive environment for GBP recovery.
British Pound Hits A Brick Wall
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