- GBP/USD prints three-day fall, grinds lower of late.
- UK experts warn over fragile moment in response to covid, ex-DUP leader fears irreparable Brexit damage.
- US dollar tracks Treasury yields to portrays rebound from three-week low.
- Markets remain cautiously optimistic ahead of US, UK PMIs, US ADP Employment Change.
GBP/USD grinds lower for the third consecutive day, down 0.13% around 1.3735 heading into Wednesday’s London open. With this, the cable pair becomes the biggest loser among the group of ten (G10) currencies.
While the broad US dollar rebound could initially be linked to the pair’s losses, pessimism surrounding the UK’s coronavirus conditions and Brexit headlines exert additional downside pressure on the quote. That said, the US Dollar Index (DXY) extends corrective pullback from the lowest since August 04 while flashing 0.08% intraday gains around 92.72.
After marking the lowest increase in virus infections the previous day, the UK’s COVID-19 daily cases count rose by 32,181 whereas the virus-led deaths rose by 50. Further, Britain braces for a final decision on the booster shots on fears that the major vaccines fade effectiveness in five to six months as per the study from Britain's ZOE COVID survey. On the same line, Sky News quotes Scotland's national clinical director Jason Leitch as saying, “The UK could soon face a ‘fragile moment’ in its response to the coronavirus crisis, has warned.”
On a different page, the chief executive of high street retail giant Next criticizes the UK government's decision to stop foreign lorry drivers as the country battles supply shortages. Elsewhere, ex-Democratic Unionist Party (DUP) leader Arlene Foster raised fears of irreparable damage due to the deadlock over the Northern Ireland (NI) protocol.
It’s worth noting that the risk appetite improves as the market seems cautiously optimistic over the inaction of the key central banks ahead of important data from the UK and the US. Additionally, mixed covid updates and downbeat China PMI, versus strong Aussie GDP, also confuse traders and underpin the US dollar’s safe-haven demand.
Amid these plays, S&P 500 Futures rise 0.30% by the press time whereas the US 10-year Treasury yields stretch the previous day’s upside to 1.33%, up to three bps.
Moving on, the second reading of the UK Manufacturing PMI for August, expected to confirm the 60.1 initial estimations, will be eyed as an immediate direction ahead of the US ADP Employment Change and ISM Manufacturing PMI for the stated month.
Given the likely softer US data backing the USD bulls, GBP/USD may witness further downside should domestic catalysts deteriorate as well.
Read: ISM Manufacturing PMI Preview: Why it could be the trigger for a big greenback comeback
Technical analysis
Failures to extend the monthly resistance breakout beyond 200-DMA direct GBP/USD sellers towards weekly support line, around 1.3720, before highlighting the August month’s low of 1.3600. Meanwhile, the stated resistance line near 1.3765 precedes the 200-DMA level of 1.3810 to guards the Sterling pair’s short-term upside.
