GBP/USD extends its pullback from highs above 1.32 registered last week. The pair has settled around the 200-DMA at 1.3040 which caps the downside pressure so far and prevents a dip below the psychological level of 1.30. The dollar shifted to a recovery mode on Monday and preserves the bullish bias today, which adds to the local pressure on the pound.
The sterling is trending lower lately as fears of a no-deal Brexit reemerge because the talks have stalled, the March 29 deadline is getting closer, and the two sides still haven’t reached a consensus on the key Irish border issue. Against this backdrop, traders prefer to exit longs in the cable though profit-taking proceeds in a measured and cautious manner.
On Thursday, investors will temporarily shift focus from Brexit and switch to the Bank of England’s ‘Super Thursday’. The central bank will announce its decision on rates, publish its meeting minutes and the quarterly inflation report. Given the lingering uncertainty surrounding Brexit, traders will pay special attention to the officials’ comments regarding the effect from the divorce process for the economy and monetary policy. Should Carney mention economic risks, GBP/USD could go even lower.