• GBP/USD witnessed some heavy selling on Wednesday amid renewed Brexit-related worries.
• A turnaround in the global risk sentiment drove some haven flows back towards the greenback.
• The impasse over US economic stimulus might cap the USD gains and help limit the downside.

The intraday selling bias around the sterling picked up pace during the early European session and pushed the GBP/USD pair to fresh daily lows, around the 1.2640 region.

The pair came under some heavy selling pressure on Wednesday amid renewed concerns over a no-deal Brexit and has now erased the previous session's positive move to the highest level since June 10. The Daily Telegraph reported this Wednesday, citing government sources, that the UK government and the EU will fail to sign a post-Brexit trade deal.

The newspaper further added that the government expects to be trading on World Trade Organisation (WTO) terms when the transition period comes to an end. This comes days ahead of the UK Prime Minister Boris Johnson's July deadline for an outline agreement, which took its toll on the British pound and led to some long-unwinding trade around the GBP/USD pair.

Apart from domestic factors, a goodish pickup in the US dollar demand further collaborated the pair's intraday downfall. As investors digested the latest optimism over a potential COVID-19 vaccine, a sharp turnaround in the global risk sentiment – as depicted by sudden fall in the equity markets – drove some haven flows towards the greenback.

However, worries that the continuous surge in new coronavirus cases in the US could delay the economic recovery might hold the USD bulls from placing aggressive bets. This coupled with the impasse over the next round of US economic stimulus measures might further keep a lid on any strong gains for the greenback and help limit deeper losses for the GBP/USD pair.

It is worth reporting that policymakers have been struggling to reach consensus on a $3 trillion relief bill. The said bill was passed by the Democrat-majority House of Representatives two months ago but has been ignored by the Republican-majority Senate. Hence, the key focus will remain on developments surrounding the US stimulus package.

Technical levels to watch