GBP/USD. Light at the end of the tunnel: Merkel provoked the growth of the British currency

The pound paired with the dollar today updated three-week highs, reaching the middle of the 22nd figure. The fundamental picture of today did not portend such price leaps: the European voyage of British Prime Minister Boris Johnson was more of a formal nature, and Thursday's economic calendar for the GBP/USD pair is completely empty. Nevertheless, bulls of the pair found a reason for the upward impulse - and this reason was provided to them by none other than German Chancellor Angela Merkel.

Looking ahead, it is worth noting that the pound is now growing more on emotions - traders of the pair have been trading in constant fear and pessimism about the Brexit prospects for too long. Therefore, when among the gloomy news background a ghostly, but still "light at the end of the tunnel" had appeared, the pound's reaction was not long in coming. Moreover, at the beginning of today the head of the German government met her colleague from Britain with rather harsh rhetoric. She stated that "Britain has 30 days to resolve the Brexit issue to find an alternative to backstop." French President Emmanuel Macron, in turn, noted that there is no more time for additional negotiations on a new agreement - the parties need to build on the main positions of the agreements already reached. Boris Johnson, in his peculiar manner, "accepted the challenge" of Berlin and said that he would spend 30 days allotted to him to convince the EU that there was a viable alternative to the "back-up" mechanism.

Obviously, both London and Brussels are well aware of the risks they face. That is why the current (albeit symbolic) step of Merkel allowed the pound to demonstrate a significant correction throughout the market, including paired with the dollar. However, long positions on the GBP/USD pair currently look risky - after all, we must not forget that the parties only promised to "consider various options". And it is far from a fact that the proposed options will ultimately be agreed/approved by Johnson, the European Union and, ultimately, by the deputies of the House of Commons. Therefore, with a high degree of probability, the spring of nervousness will continue to contract to a certain limit, putting pressure on the foot. But if the parties still find a compromise and the likelihood of a deal will increase again, this "spring" will fire an impulsive price increase, and marks 1.25-1.27 will not be any limit.

Analysis are provided by InstaForex