Following two days of gains, the British pound shows early signs of weakness. GBPUSD is losing upside steam on Wednesday after failed attempts to make the 100-daily moving average into support. Earlier today, the pair briefly climbed to 1.2540 region and has settled marginally below 1.25 since then. A break below this level could send the prices back under the 50-daily moving average around 1.2420.
Risk sentiment has deteriorated on Wednesday, as after mixed trading in Asia, European stocks opened lower amid growing concerns over rising coronavirus cases globally. The upside impetus in stocks is faltering as optimism about the economic recovery is being overshadowed by fears of a second wave of the pandemic.
Yesterday, cable was buoyed by decent flash PMI data out of the United Kingdom that helped to boost expectations of a more rapid economic recovery from the coronavirus pandemic. However, once traders have digested the release, the bullish tone started to wane along with the reemerging selling pressure surrounding the high-yielding assets.
It looks like GBPUSD is set for a period of consolidation in the short term, with the 1.25 handle remaining in market focus. A daily close below this level will signal deterioration in the short-term technical picture surrounding the pound. On the downside, a break below the mentioned 50—daily moving average could send the prices to early-June highs registered at the start of the week around 1.2330. This level could act as strong support and trigger a bounce.
From the fundamental point of view, the pound is getting more vulnerable amid the uncertainty ahead of the key Brexit negotiations due next week. Also, the coronavirus-related developments add to worries as the death toll in the UK surpassed 54,000 recently, making investors worried about a possible second wave of the pandemic. Besides, the resurgent demand for the greenback caps the upside potential in the pair at this stage.