Sterling fell along with other major currencies as the dollar gained on fears that rising coronavirus infections could develop into a second-wave outbreak that diminishes global economic recovery prospects.
Recent GBP/USD gains came in the absence of EU-UK trade negotiations progress, and may have been aided by unwinding of recent speculative shorts when COVID-19 economic uncertainties were ebbing. In early U.S. trade the pound had fallen away from its overnight high of 1.2541 to a session low of 1.2455.
Another virus-related hit to the global economy would add to fears of a hit to the UK if it fails to reach a final-status trade deal with the EU, a negative for GBP/USD.
GBP/USD bulls' failure to hold gains above the falling 10-day moving average, and the compression of multiple daily moving averages between 1.2430 and 1.2513, indicate potential for increased near-term volatility.
Recent sterling strength may be seen as an opportunity to reinstate short positions. If COVID-19 and BrexitnS8N2AH07G are seen hindering growth, rallies before the 200-DMA by 1.2693 should be faded with an eye to returning to May 18 lows by 1.2075.
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