GBP/USD steadies below daily highs ahead of more BoE speak

• GBP/USD is off highs, but one of the best performing USD pairs on the day, up 50 pips or 0.4%.
• The pair is being supported by growing expectations for the upcoming departure of the UK PM’s Brexiteer advisor Cummings.
• BoE speak during the European afternoon could provide the pair with further impetus.

GBP/USD caught a bid as the European session begun on Friday, with the pair rising from overnight lows of just above 1.3100 to highs of just under 1.3190, before pulling back to trade just north of the 1.3150 level. That pair still trades with gains of roughly 50 pips, or 0.4%.

GBP/USD boosted with Brexiteers lose sway in the UK government

GBP is the best performing G10 currency so far on Friday, with some attributing gains to growing expectations for a departure of UK PM Boris Johnson’s special advisor and arch-Brexiteer Dominic Cummings from the government. Some analysts have argued that Cummings’ exit from the folds of top-level UK government decision making improves the chances that the EU and UK will be able to agree on a free trade deal to replace the current arrangement at the end of the year – Cummings is widely seen as the brains behind the Leave campaign that successfully campaigned for Brexit in the run-up to the 2016 referendum and is an arch-Eurosceptic who has urged takes a hard-line in negotiations.

Speculation regarding Cummings departure (he is now expected to have left Downing Street by Christmas) has grown in recent days following the resignation of his close colleague Lee Cain, former Director of Communications and another close aid to UK PM Johnson.

In terms of the latest on EU/UK negotiations; a UK PM Johnson spokesperson this morning said that familiar difference remains between the two sides on the issues of level playing field and fisheries, confirming reports earlier in the week that little to no real progress towards a deal had been made this week. The spokesperson added that talks will pause over the weekend and resume in Brussels next week.

Looking ahead for the rest of Friday’s session, GBP could garner further impetus from more Bank of England speak. Monetary Policy Committee member Silvana Tenreyro speaks at 15:00GMT and Governor Andrew Bailey speaks at 17:00GMT. Both have spoken already this week.

Bailey noted on Thursday that the BoE is not looking at implementing a yield curve control policy (as currently being seen in Australia and Japan), said that GDP is coming in broadly in line with the bank’s expectations and gave nothing new away on when the bank will be concluding its review on negative interest rates. Meanwhile, on Wednesday, Tenreyro reiterated her seemingly pro-negative rate stance, saying that the positive evidence related to negative rates comes from Europe, where it has worked fairly well.

Turning to the US dollar side of the GBP/USD equation, USD has been choppy today but is broadly a little softer and was unresponsive to mixed US PPI data for October and Fedspeak. To recap the latter, NY Fed President John Williams reiterated the points made by Chairman Jerome Powell yesterday (that the economy is doing better than expected and continues to improve but rising virus cases pose a risk) and FOMC member James Bullard said there is room for a drop in the unemployment rate to 4.9% in the months ahead.

GBP/USD rangebound between the 1.31-1.32 big figures

Amid a lack of any notable levels of support or resistance to either the immediate upside or downside, GBP/USD may well continue to range between 1.3100-1.3200 parameters as long as USD remains subdued.

The psychological 1.3200 level should provide resistance given that it also coincides with the 11 November low and 9 November high. To the downside, the next notable support beyond the psychological 1.3100 level is the 21-day moving average at 1.3048.

Looking at GBP/USD more broadly, the pair has maintained its medium-term upwards bias within an upwards trend channel; this channel links (roughly) the September and late-October/early-November lows (at roughly 1.2700 and 1.2900 respectively) to the downside, and the mid-September highs to the October high, to this month’s high (at roughly 1.3000, 1.3160 and 1.3300 respectively).