GBP/USD fails again to hold above 1.3200

Cable bottomed earlier at 1.3156 and rebounded, rising back above 1.3200. But again it failed to hold on top and pulled back. It was trading at 1.3180, around the level it closed on Friday.

GBP/USD consolidation near 1.3200

The pound is among the top performers on Monday, on a quiet day with the US dollar higher in the market amid optimist of Trump’s tax reform.

Since last Tuesday, GBP/USD is moving near the 1.3200 handle. It moved way on Friday, but quickly rose back toward the mentioned area. Today it failed two times to hold on top, while the downside, found support quickly at 1.3150.

The short-term outlook would point to an extension of the consolidation around 1.3200 as long as price remains unable to move significantly away from that area. A significant close on top of 1.3220 could clear the way to more gains while to the downside a slide below 1.3140 would add bearish pressure to the pair.

Brexit and BoE

From a fundamental perspective, the pound received some support last week, from the latest Brexit talks where UK PM May and the EU Commission agreed to speed up negotiations. Recently May said that she is confident that a good deal will be reached and that she wants a transition period with “as little change as possible”.

Brexit: UK's PM May is confident on UK getting a good deal with EU

The pound is moving in the market amid concerns from Brexit negotiations, the latest round of economic data (mixed activity, higher inflation) and rate hike expectations from the Bank of England.

“If the Bank of England hikes rates early next month, as the market expects (~80% probability), it will look more like the Bank of Canada's move than the Fed's. The Bank of England cut rates, and eased policy in other ways, after last year's Brexit referendum. With the economic activity moderating, and price pressures expected to peak soon, and the significant pass-through of higher rate to households, a sustained campaign to normalize monetary policy does not appear to be at hand”, said analysts from BBH. That could explain why the pound has been unable to make a sharper recovery against the US dollar during the last weeks.