FX.co ★ GBP/USD. New heights of the British pound: "unsinkable" pound again updates local highs

The British pair with the dollar stormed at the 30th figure again. Over the past three weeks, buyers of GBP/USD have made several attempts to gain a foothold above the key resistance level of 1.3000 but all of them ended in failure. The changeable fundamental background for the pair did not allow the bulls to settle in this price area. But, as they say, "our proud Varangian does not give up to the enemy": the British currency shows amazing stress resistance and perseverance. The overall market sentiment is also in favor of the pound. In particular, the evidence of today's reaction for traders to the macroeconomic reports were published in the UK. Despite all the contradictions, the market still concluded a positive note after which the pound went to conquer new price heights.

Although in fact, the published figures did not contribute to such a sharp rise in the British. The General consumer price index on a monthly basis came out slightly worse than the forecast values being at the level of 0.4%, instead of the expected result of 0.5%. In annual terms, the indicator on the contrary – slightly exceeded forecasts, rising to 0.5% (experts expected it to be around 0.4%). The core index excluding volatile energy and food prices came out in line with the forecast ending up at 1.3% (after a record decline to 0.9%). In other words, inflation has shown signs of recovering, but the CPI growth rate still leaves much to be desired.

The other components of today's release also do not indicate any "inflationary breakout". Thus, the retail price index came out in the "red zone", falling short of the forecast levels – both on an annual and monthly basis. The index of purchasing prices of producers, which is a signal of increasing inflationary pressure, slightly exceeded forecasts even though in annual terms this indicator still cannot get out of the negative area.

Thus, the figures published today cannot be called a failure but they do not break even either. Therefore, the sharp rise of the British currency should be viewed through the prism of Brexit, since the inflation release itself served only as a trigger for the Northern impulse.

Let me remind you that on the eve of the EU summit, British Prime Minister Boris Johnson threatened to put an end to trade negotiations if the parties did not come to a compromise. The Europeans also urged to prepare for the implementation of a hard scenario and even before the event. As a result, the meeting really ended as a complete failure – the parties could not agree on the key and most complex issues (in particular, the issue of fishing), rejecting Johnson's idea of concluding a deal on the Canadian tracing paper. Earlier this week, the situation hung in the air: Downing street declared the futility of further dialogue while Michel Barnier canceled his visit to London, as if agreeing with this conclusion. However, the negotiation epic is still not over. Yesterday, representatives of the European Commission said that they are ready to resume consultations – in their words, "Brussels will try to reach a compromise until the last day of the transition period."

Together with this statement, an unofficial information appeared on the market that Boris Johnson is ready to review the most controversial provisions of the controversial bill on the domestic market. It is worth noting here that this bill largely negates some of the provisions of the Brexit agreement regarding the "transparency" of the Irish border. The High-profile document was approved in the lower house of Parliament as a safety "plan B" - in case a trade deal is not concluded. Moreover, the final version of the document was changed by parliamentarians: key decisions regarding the border regime will be made not by the government but by the House of Commons. But even in this form, the bill was criticized by Brussels. This week, the document was sent to the House of lords. Peers cannot cancel a bill that has already been passed but they can make their own changes by sending the document for reconsideration. So, according to Bloomberg, the lower house will agree with the "pro-European amendments" of the lords and thus unleash the existing problem.

Thus, despite all the loud statements, mutual accusations and slamming doors traders remain optimistic about the fate of the trade deal. It is clear that now there is a kind of game of nerves between politicians, which is inherent in any trade negotiations (remember what fierce battles were around the Brexit agreement or the trade deal between the United States and China). But at the same time, the market is confident that in the end the parties will find a common denominator or at least extend the transition period.

That is why the pound is in demand: any more or less large-scale price decline in GBP/USD is considered by the market as a reason to open long positions. The nearest resistance level is quite close – it is 1.3090 (the upper line of the Bollinger Bands indicator coincides with the upper border of the Kumo cloud). When fixing higher, you can consider longs with a more ambitious goal, which corresponds to the "round" mark of 1.3200.