- GBP/USD snaps two-day uptrend, eases from weekly top.
- Ireland’s DUP leader threatens to overrule border checks if PM signs NI protocol.
- British covid cases ease but death toll stays firmer, return of lockdown feared.
- UK Consumer confidence jumps to pre-covid era, Retail Sales, PMI will be the key recall bulls.
GBP/USD bottoms out from intraday low surrounding 1.3750 to 1.3764, mostly unchanged ahead of Friday’s London open. In doing so, the cable pair struggles to extend the two-day rebound as Brexit jitters join the covid woes to tame the bulls. Even so, cautious optimism in the markets, coupled with upbeat UK fundamentals, seem to keep the bulls hopeful ahead of UK Retail Sales and preliminary readings of July PMIs.
Ireland’s Democratic Unionist Party (DUP) Leader Sir Jeffrey Donaldson conveyed its strong rejection of the Brexit deal and cost that the Northern Ireland needs to bear, due to the border checks over British goods entering the region. The recently elected head of the largest unionist party in Northern Ireland warned yesterday, per The Times, “Northern Ireland ministers will unilaterally suspend checks on goods crossing into the province from Britain if the prime minister signs up to an ‘unacceptable’ new Brexit deal.”
On Thursday, European Commission President Ursula von der Leyen turned down UK PM Boris Johnson’s other push to alter Northern Ireland (NI) protocol by tweeting, “we will not renegotiate” term.
Elsewhere, UK PM Johnson has backed an emergency plan to avoid disruption of UK food supplies caused by Covid-related staff shortages, per the Financial Times (FT). Not only the food shortage but the warning of another lockdown by the British scientists and a steady rise in the death toll, recently to 83, also weighs on the GBP/USD prices.
Alternatively, S&P 500 Futures remains mildly bid as optimism over US President Joe Biden’s infrastructure spending plan and US debt limit keeps the pair buyers hopeful. Additionally, a recovery in the GfK Consumer Confidence for July to pre-pandemic levels also restricts the GBP/USD pair’s downside.
Looking forward, the UK Retail Sales for June, expected to reverse -1.4% MoM print with +0.4%, will precede July’s Manufacturing and Services PMI, bearing respective forecasts of 62.5 and 62.0 versus 63.9 and 62.4 in that order, will direct immediate GBP/USD moves. Following that, the US PMIs will be the key as the Sterling traders will seek confirmation of the covid woes and may react positively to welcome surprises.
Read: US Markit PMIs Preview: Pre-weekend dollar boost? Downbeat figures could exacerbate risk-off mood
Technical analysis
GBP/USD recovery moves from 61.8% Fibonacci retracement (Fibo.) of December 2020 to June 2021 upside manages to cross the key SMA and 50% Fibo. hurdle, keeping the buyers hopeful. Also favoring the bulls is the MACD line that teases a bullish breakout over the signal line.