Forex Market: GBP/USD extends gains ahead of new Brexit talks, speculators’ net short position on Pound shrinks for a second week

GBP/USD extended gains from the prior two trading days and was holding above the 1.3100 mark during late European session on Monday, after weekly CFTC futures data showed investors’ net short speculative position on the Sterling had shrunk for a second straight week.

The CFTC reported that speculators’ net short position on the British currency had decreased during the week to August 11th, while being the smallest in four months.

The US Dollar was slightly lower against a basket of six major peers on Monday, as market risk sentiment improved after the review of the “Phase One” trade deal between the United States and China had been postponed.

Meanwhile, a new round of post-Brexit trade talks is scheduled to commence tomorrow, with the focus being on the matter of whether London’s financial industry will gain access to the EU’s market. London may not determine whether it will have access to the entire EU market until after the end of 2020, according to the EU’s financial services chief Valdis Dombrovskis.

“The latest headlines on this topic warn that there may be delays to financial equivalence discussions, meaning possible delays for UK banks in securing pan EU market access rights,” ING strategists wrote in an investor note.

As of 11:09 GMT on Monday GBP/USD was inching up 0.07% to trade at 1.3088, while moving within a daily range of 1.3079-1.3122. The major pair advanced 5.52% in July, while marking a second straight month of gains and its best monthly performance since May 2009. The pair has edged up another 0.24% so far in August.

On today’s economic calendar, the Federal Reserve Bank of New York will report on manufacturing activity in the area at 12:30 GMT. The New York Empire State Manufacturing Index probably dropped to 15.0 in August, according to market expectations, from a level of 17.2 in the prior month. July’s reading pointed to the first increase in business activity in New York since the start of the COVID-19 pandemic and also the sharpest increase since November 2018.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 18.4 basis points (0.184%) as of 10:15 GMT on Monday, up from 17.1 basis points on August 14th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3090
R1 – 1.3132
R2 – 1.3185
R3 – 1.3227
R4 – 1.3269

S1 – 1.3037
S2 – 1.2995
S3 – 1.2942
S4 – 1.2889

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