GBP/USD surrenders modest intraday gains to over one-week highs

• GBP/USD struggled to capitalize on its intraday gains beyond the 1.3500 mark.
• Brexit woes turned out to be a key factor that acted as a headwind for the GBP.
• Hawkish Fed expectations underpinned the USD and collaborated to the decline.

The GBP/USD pair extended its steady intraday descent through the early North American session and dropped to a fresh daily low, around the 1.3465 region in the last hour.

The pair struggled to find acceptance above the key 1.3500 psychological mark and witnessed an intraday turnaround from over a one-week high touched earlier this Thursday. Given that an imminent rate hike by the Bank of England is already priced in the markets, persistent Brexit-related uncertainties acted as a headwind for the British pound.

Investors remain worried about the possibility that the UK government would trigger Article 16 and suspend parts of the Northern Ireland Protocol. Apart from this, the impasse over the post-Brexit fishing rights held bullish traders from placing aggressive bets around the GBP/USD pair, rather prompted fresh selling at higher levels.

On the other hand, the US dollar reversed an intraday dip and continued drawing some support from the prospects for an early policy tightening by the Fed amid rising inflationary pressures. That said, sofer tone around the US Treasury bond yields kept a lid on any meaningful gains for the greenback and could lend some support to the GBP/USD pair.

On the US economic data front, the Philly Fed Manufacturing Index jumped to 39 in November as against consensus estimates pointing to an uptick to 24 from 23.8 in the previous month. This, to a larger extent, was offset by higher Weekly Jobless Claims, coming in at 268K during the week ended November 12, and did little to provide any impetus.

Hence, it will be prudent to wait for a strong follow-through selling before confirming that the recent recovery from the lowest level since December 2020 has run out of steam. Meanwhile, bulls are likely to wait for a sustained strength beyond the 1.3500 mark before positioning for any further appreciating move for the GBP/USD pair.

Technical levels to watch