GBP/USD remains depressed below 1.3450 amid USD strength, Brexit woes

• GBP/USD attempts a bounce but firmer USD caps the upside.
• EU calls on Brexit minister to stop ‘political posturing’ over NI protocol.
• BOE’s Bailey downplays inflation concerns, eyes on risk trends, Brexit.

GBP/USD is attempting a tepid recovery towards 1.3450 heading into the European open, as the risk sentiment improves. However, the further upside appears elusive amid stronger US dollar and persistent Brexit worries.

Brexit concerns loom

At the press time, the currency pair is recovering losses near 1.3445, having hit the intra-day lows at 1.3428 earlier on.

The latest uptick in the spot comes on the back of improving market mood, as the Asian equities jump back into the green after a negative opening while the S&P 500 futures rise 0.31% so far.

Markets seem to look past the resurfacing European COVID-19 concerns, as expectations of a faster Fed taper amid a strengthening US economy underpin the mood. However, the further recovery appears elusive, as the US dollar holds onto the recent gains alongside a rebound in the Treasury yields.  

On Friday, the US dollar rallied hard to retest the 16-month highs against its major peers after a risk-off wave gripped the financial markets on renewed concerns over a potential lockdown in Europe, in the face of coronavirus contagion. The major fell as low as 1.3408 on heightened demand for the safe-haven dollar.

Meanwhile, on the Brexit front, the European Commission Vice President Maroš Šefčovič accused the UK Brexit Minister David Frost of ‘political posturing’ over the Northern Ireland (NI) protocol, citing ‘more urgency’ required in negotiations.

Investors digest the weekend’s comments from the Bank of England (BOE) Governor Andrew Bailey. Bailey said that inflation could be "elevated for longer" but there is also a chance that it does not prove as persistent as feared.

Next of relevance for the spot remains the US Existing Home Sales data for some fresh trading incentives. However, the broader market sentiment, Brexit headlines and the US dollar dynamics will continue to emerge as the main catalysts for the cable.

GBP/USD: Additional levels to consider