- GBP/USD fades corrective pullback from weekly low but defends bulls.
- EU braces for official announcement of delaying sausage war, UK reveals post-Brexit subsidy plan.
- UK records easing in infections, higher covid-led death toll.
- UK Q1 GDP to confirm -1.5% QoQ initial forecast, US ADP Employment Change will be more important data.
GBP/USD picks up bids to 1.3852, struggles to keep Asian session gains to 0.11%, heading into Wednesday’s London open. Even so, the cable remains positives around a one-week low flashed the previous day as Brexit headlines have been positive of late.
Having earlier signaled to compromise over banning the British meat from Northern Ireland (NI), the EU is up for the formal announcement. “The European Union (EU) is to formally agree to postpone a ban on some British meat products being sold in NI,” said the BBC. It should, however, be noted that the bloc’s complaints about NI Protocol remain due in the court.
On the other hand, the UK Government also unveiled plans to help domestic industries, overseeing subsidies to companies, following the Brexit. Offering the details from UK’s Business Secretary Kwasi Kwarteng, Bloomberg said that the system will be “more agile and flexible” than before Brexit, when the U.K. followed the EU’s state aid regime and large subsidy awards required European Commission approval.
While the Brexit headlines keep risk-taking buyers hopeful, the coronavirus (COVID-19) updates probe the bulls. The UK’s latest figures suggest 20,479 new COVID-19 cases versus 22,868 a day earlier on Tuesday while the death toll rose from 3 to 23 during the stated period.
It’s worth noting that grim concerns over covid variants have recently been weighing on the market sentiment and put a bid under the US dollar. Also favoring the greenback could be the cautious sentiment ahead of Friday’s US Nonfarm Payrolls and mixed Fedspeak. Recently, Fed Governor Christopher Waller probed the risk-on mood in a Bloomberg TV interview by saying, “Inflation expectations seem anchored.”
Amid these plays, stock futures remain print mild gains around record top while the US Treasury yields and the US dollar index (DXY) remain sluggish by the press time.
Moving on, the Final print of the UK’s Q1 GDP, expected to confirm -1.5% QoQ forecasts, may offer immediate reaction to GBP/USD prices, mostly upside on positive surprises. However, US ADP Employment Change for June, expected 600K versus 978K prior, becomes more important data. Above all, Brexit and covid headlines, as well as the Fedspeak, could keep the driver’s seat.
Technical analysis
With the latest bounce failing to defy the downside momentum, by staying below the 100-day EMA with mostly the same MACD conditions, GBP/USD remains on the sellers’ radar. However, an upward sloping trend line from early February, around 1.3800, become the key nearby support to watch during the pair’s further weakness. Meanwhile, an upside break of 100-day EMA, near 1.3905 could aim for the 1.4000-4010 resistance area comprising multiple tops marked since mid-March.
