- GBP/USD consolidates Friday’s gains following a downbeat week-start.
- EU’s Barnier indirectly proposes ban on British migrants’ settlement, Brexit/covid propel fears of losing the UK’s best talent.
- UK government panel warns over future variants that could defy vaccine protection, infections rise but virus-led death toll ease.
- UK jobs report, US Retail Sales will be important data to watch for fresh impulse.
GBP/USD remains on the back foot around 1.3840-45 amid the initial Asian session on Tuesday. The cable stepped back from a confluence of the monthly resistance line and 50-DMA the previous day to consolidate Friday’s gains.
While the risk-off mood joins Brexit headlines to weigh on the GBP/USD prices, the pair sellers await monthly employment data from the UK for fresh impulse.
The recently high virus infections and the fears of more strains challenging the economic recovery from the pandemic to take the front seat to weigh on the market sentiment. As per the latest count, the UK marked 28,438 new COVID cases and 26 more coronavirus-related deaths versus 26,750 infections and 61 fatalities noted the previous day. On the same line, Yahoo News quotes the Scientific Advisory Group for Emergencies (SAGE), the UK government's advisory panel as saying, “A future new coronavirus variant capable of beating the protection given by current vaccines is ‘almost certain’ to emerge.”
Elsewhere, fears that the US covid cases will jump to the 200,000 levels, marked earlier in 2021, coupled with the multi-month high infections from Asia–Pacific, also amplify the virus fears.
It’s worth noting that the Taliban’s takeover of Kabul and US President Joe Biden’s recent fears of such activities spreading out of Afghanistan, if not controlled, exert an additional downside burden on the market’s risk appetite.
Brexit fears also join the list and weigh on the GBP/USD prices. As per Marsile News, “Former EU Brexit negotiator Michel Barnier last week called for a five-year moratorium on all immigration into the EU — a move that would effectively ban British settlement and all others.”
Amid these plays, the US Dollar Index (DXY) pared Friday’s losses, due to the greenback’s safe-haven demand, whereas the US 10-year Treasury yields dropped 2.9 basis points (bps) to 1.268%.
Moving on, the UK’s jobs report will be the key as the latest Reuters’ poll keeps suggesting that the Bank of England (BOE) will raise benchmark rates in 2023.
Forecasts suggest the Unemployment Rate for three months to June to remain unchanged around 4.8%. Hence, the monthly Claimant Count Change, prior -114.8K, will be the key to watch. Should the data portrays the employment recovery, even if a survey by the MovePlan, raises doubts over it, could keep the GBP/USD regain upside momentum.
Following the UK data, the US Retail Sales will be important amid the latest easing of the consumer-centric figures.
Also read: US Retail Sales Preview: Dollar booster? Low expectations, market mood point to a clear reaction
Technical analysis
Unless breaking convergence of monthly resistance line and 50-DMA, around 1.3870-75, GBP/USD remains vulnerable to retest 200-DMA level of 1.3784.