GBP/USD awaits fresh clues to extend recent recovery, Brexit optimism prevails

• GBP/USD recently benefits from the UK’s political events receding odds of a no-deal Brexit.
• The British Parliament’s support for early election follows the EU’s Brexit extension.
• The bill needs to pass through the House of Lords during the weekend, early next week to call on the first December month election since 1923.

Not only the market’s cautious sentiment ahead of the key events but the lack of fresh clues also limits the GBP/USD pair’s performance as it trades near 1.2865 during Wednesday’s Asian session.

The Cable recently recovered as events surrounding the Brexit cut odds of a no-deal departure of the United Kingdom (UK) from the European Union (EU). Recent developments, as cited by the Times, suggest the UK PM being optimistic about breaking the Brexit impasse after winning House of Commons’ support for his motion calling for an early election.

However, uncertainty surrounding the politics still prevails as the Bill needs to pass through the House of Lords before the weekend or early next week to become the Law and call for the first December month election since 1923.

Additionally, comments from Chinese envoy, criticizing the United States’ (US) on its say on Xinjiang issue and the US House of Representatives’ overwhelming support to sanction Turkey also challenges market’s risk sentiment.

With this, the US 10-year Treasury yields witness downside pressure to 1.83% after Wall Street closed in negative.

Moving on, monetary policy meeting by the US Federal Reserve and the preliminary reading of the US third quarter (Q3) Gross Domestic Product (GDP) will decorate the economic calendar today. “We expect the Fed to lower rates by 25bp again on Wednesday to 1.50%-1.75%, delivering the third consecutive rate cut since July. The FOMC is likely to communicate patience in deciding future policy moves after this week as they assess the impact of the three cuts they would have already delivered. We look for the Fed to temporarily pause before resuming rate cuts in Q1 2020. We are projecting GDP growth to have maintained second quarter's pace, printing 2.0% q/q saar for Q3 (market: 1.6%). Reflecting ongoing uncertainty, we expect nonresidential fixed investment to have declined during the quarter, and private consumption to have slowed down following Q2's strong 4.7% print. Inventories and net exports likely reduced GDP growth again in Q3,” says TD Securities ahead of the event.

Technical Analysis

While 1.3000 and the recent high near 1.3015 could keep the pair’s near-term upside limited, a downside break of 1.2800 could take rest on the 21-day Exponential Moving Average (EMA) level of 1.2715 ahead of revisiting September high surrounding 1.2580.