The buying pressure on the greenback has eased since Friday rally, but it doesn’t help the pound which remains on the defensive at the start of a new trading week. The GBPUSD pair opened with a bearish gap on Monday, with the price got back below 1.29 and is approaching the 20-DMA at 1.2850. The selling pressure could increase further in the coming days as the House of Commons returns from the Summer holiday, and Brexit will dominate the headlines down the road.
Brexit uncertainty is still there and the unresolved issues continue to limit the pound’s upside potential even as the greenback trading is subdued. Over the weekend, Barnier said that he is “strongly opposed” to May’s Chequers’ proposals which as he pointed would signal “the end of the single market and the European project”. As such, the two sides are yet to reconcile the differences to find a solution that will suit both.
Against this backdrop, traders will likely refrain from sterling buying, with rally attempts could attract bears and send the pair below 1.28 in the coming days. Another risk for the pound is the worsening risk sentiment amid the ongoing US-China trade war, uncertainty around NAFTA negotiations and the currency crisis in the emerging markets.