- The GBP/USD pared earlier losses as investors remained hopeful about a Brexit deal.
- Earlier today, the European Union launched a legal action against the UK on the Internal Market Deal.
- The pair also reacted to strong manufacturing PMI data from the UK.
The GBP/USD pair pared earlier losses as traders reacted to the new developments on Brexit. It also reacted to the overall weaker US dollar and the relatively strong UK manufacturing PMI data. It is trading at 1.2957, which is lower than the intraday low of 1.2817.
European Union sues the United Kingdom
The European Union launched a legal action against the United Kingdom in protest to the Internal Market Bill. The EU had given the UK until yesterday to remove parts of the bill that break international law.
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The internal market bill is part of Boris Johnson’s administration to streamline trade relations between England, Wales, and Northern Ireland. Notably, the bill would go against parts of the bill that the EU and the UK negotiated last year. Johnson’s government has said that the bill is important to mitigate the implications of a no-deal Brexit.
The legal action by the EU comes at a delicate time. In Brussels, teams from the two sides are meeting to deliberate on key issues like trade and fisheries. If there are still significant differences when the talks end tomorrow, it will increase the possibility of a no-deal Brexit. On the other hand, if they reach some agreements, they will start more in-depth negotiations before the unofficial deadline of October 15th.
Still, according to Sebastian Payne, a Financial Times reporter, officials in London believe that the two sides will reach an agreement. He said:
UK manufacturing PMI remains strong
The GBP/USD pair is also reacting to the positive manufacturing PMI from the UK. According to Markit, the country’s manufacturing PMI rose to 54.1 in September. This made it the fourth consecutive month of rising output. Still, it was below the previous month’s 55.2.
According to Markit and CIPS, output in the manufacturing sector increased for the fourth straight month. Input orders rose while input cost inflation rose for the eighth consecutive month. Also, business confidence among manufacturers increased to a 28-month high. However, most manufacturers continued to report job losses. In a statement, Rob Dobson of Markit said:
“September saw UK manufacturing continue its recovery from the steep COVID-19 induced downturn. Although rates of expansion in output and new orders lost some of the bounce experienced in August, they remained solid and above the survey’s long-run averages.”
GBP/USD technical outlook
The daily chart shows that the GBP/USD is in its sixth consecutive days in the green and is also trading at the highest level since September 18th. The price has also managed to move above the 25-day and 15-day exponential moving averages. It is also slightly above the ascending trendline shown in green. Therefore, it seems like bulls are now in control, which means that the pair will continue rising as they aim for the next target at 1.3100.