- GBP/USD snaps three day winning streak, consolidates gains near 11-week top.
- UK warns over NI post-Brexit trade deal, French-British tension ease in Jersey waters.
- British scientists warn over UK unlock, Queen’s speech highlighted government push for economic recovery.
- UK Q1 GDP is expected to contract, US CPI may keep reflation fears on the table.
GBP/USD eases from the multi-day top, marked on Tuesday, taking rounds to 1.4140 during Wednesday’s Asian session. In doing so, the cable portrays a typical cautious mood ahead of the key UK Q1 GDP and the US Consumer Price Index (CPI) data for April.
Sterling managed to refresh the highest levels since February 25 the previous day after UK’s Queen Elizabeth II outlines the government’s recovery plan in the British Parliament. “To achieve this, my government will level up opportunities across all parts of the United Kingdom, supporting jobs, businesses and economic growth and addressing the impact of the pandemic on public services,” said the 95-year-old monarch, per Reuters.
Also favoring the GBP/USD buyers were easing tension between France and the UK at the Channel island of Jersey on the proposed delay of new post-Brexit restrictions on French fishermen. However, UK’s Brexit negotiator and minister David Frost said, per Reuters, “Businesses have gone to extraordinary efforts to make the current requirements work, but it is hard to see that the way the (Northern Ireland) Protocol is currently operating can be sustainable for long.”
Elsewhere, the UK’s Imperial College's COVID-19 Response Team said, per the Sky News, “A third coronavirus wave could happen in late summer or autumn if the next steps out of lockdown continue as planned.” It’s worth mentioning that Bank of England (BOE) Governor Andrew Bailey refrained from any direct economic signals during his latest speech and chose to speak over LIBOR (London Inter-bank Offered Rate) while saying, “the "hardest part of mountaineering is often the descent."
Above all, the US dollar index (DXY) downside helps the GBP/USD bulls as traders turn cautious and wait for the key data from Britain and America.
Looking forward, a new index to track the progress of the UK’s ‘leveling up’ agenda is on the cards, per the Financial Times (FT). However, major attention will be given to how Britain manages to keep the jump in growth figures as the Q1 GDP is likely to ease -1.6% from +1.3% prior in its preliminary release. GBP/USD bulls will aim for an upbeat, even slightly, to stay hopeful.
Read: UK GDP Preview: Contraction to trigger correction? Sterling set for a reality check
Following that, the US CPI is also anticipated to cause market havoc if matching a 3.6% YoY forecast versus 2.6% prior.
Read: US Consumer Price Index April Preview: The two base effects of inflation
Technical analysis
The upper line of the one-month-old rising trend channel around 1.4145 tests GBP/USD bears amid overbought RSI conditions, suggesting a pullback move towards the previous key resistance area around 1.4020-10 comprising multiple tops marked since early March.