GBP/USD reached 1.2915, the highest level since October. This is above the previous high of 1.2905 seen after the announcement of the UK elections on June 8th. After reaching the new high, Sterling became shy once again.

Is this a false break? Perhaps, but one that could preclude a second, more determined move.

Momentum is with the British pound, at least until we get some seriously bad Brexit news. This could come as early as tomorrow’s GDP report. UK growth has been robust in Q3 and Q4 2016, immediately after the EU Referendum. Early signs from 2017 point to a gloomier picture: fewer shopping sprees by British consumers seem to lead the slowdown.

But for now, hopes for a softer, gentler Brexit help the pound.

Trump tax trouble

On the other side of the equation, we find the embattled US dollar. Touting the tax plan, the Trump Administration thought it could find a massive achievement. Markets were cautiously optimistic since Friday’s pre-announcement of a big tax cut plan coming along.

The hot air came out of the balloon yesterday. Cohn and Mnuchin presented a plan that is indeed a “once in a generation” program. Slashing the corporate tax to 15% would be a tremendous move. However, the one-page program’s dearth of details made it look like a non-starter from the outset.

Besides, it is hard to see how the deficit will be tackled and what kind of support the plan could garner. The dollar slipped on the announcement and remains on the back foot.

GBP/USD levels

Pound/dollar is currently under 1.29, with resistance awaiting at 1.2905, the high point of the previous attempt on the topside. Further resistance awaits at the round level of 1.30. This is more of a psychological level than a technical one.

Further above, we find 1.3050 which capped the pair in October, followed by 1.3130, another peak in the autumn of 2016.

On the downside, 1.2790, the initial Brexit high, serves as initial resistance. It is followed by 1.27.