GBP/USD approaches 1.2300 as Brexit woes battle softer USD ahead of US Consumer Confidence

• GBP/USD regains upside momentum after Monday’s lackluster performance.
• UK lawmakers back Northern Ireland Protocol Bill in first of many parliamentary tests.
• US dollar struggles to regain market confidence amid lack of major data/events.
• BOE’s Cunliffe, US CB Consumer Confidence to direct intraday moves, Wednesday’s ECB Forum is the key.

GBP/USD grinds higher around the intraday top near 1.2285, following a sluggish start to the week, as buyers cheer the US dollar weakness during Tuesday’s Asian session. In doing so, the Cable pair ignores recent negative news surrounding Brexit, as well as the UK’s political jitters.

That said, the UK policymakers in the House of Commons voted in favor of the Northern Ireland Protocol (NIP) Bill late Monday. Even if the NIP has multiple hurdles to cross before becoming legislation, the European Union’s (EU) trade warnings make the latest passage a grim event for the GBP/USD traders. “Despite some fierce criticism, lawmakers voted 295 to 221 in favor of the Northern Ireland Protocol Bill, which would unilaterally overturn part of Britain's divorce deal from the EU agreed in 2020. The bill now proceeds to line-by-line scrutiny,” said Reuters.

The Brexit move appears a political play to defend UK Prime Minister (PM) Boris Johnson’s position after criticism of the patygate scandal, as well as the Conservatives’ defeat in the recently held two parliamentary by-elections.

Alternatively, the US Dollar Index (DXY) stays pressured at around 103.95 after declining for the last two consecutive days. It’s worth noting that mixed US data, as well as the quarter-end positioning, could be linked to the latest weakness of the greenback.

On Monday, US Durable Goods Orders rose to 0.7% in May, versus 0.1% expected and 0.4% prior. That said, the widely tracked Nondefense Capital Goods Orders ex Aircraft also cross 0.3% market forecasts and previous readings to increase by 0.5% during the stated month. Further, the US Pending Home Sales also surprised the USD bulls with 0.7% MoM figures for May versus -3.7% expected and -4.0% prior. The YoY figures, however, came in negative to -13.6% versus -9.8% prior. Further, Dallas Fed Manufacturing Business Index for June dropped to the lowest level since May 2020, to -17.7 versus -3.1 forecasts and -7.3 prior.

Meanwhile, risks emanating from Russia and China appear to weigh on the market’s mood and test the GBP/USD buyers of late. Among them, the chatters surrounding the North Atlantic Treaty Organization (NATO) nations to take a tough stand on China and Russia are the major challenges. On the same line is Moscow’s first default since 1918.

While portraying the mood, the S&P 500 Futures print mild gains while the US 10-year Treasury yields probe a two-day rebound around 3.19% by the press time.

Looking forward, more updates on Brexit and global recession fears are likely to direct GBP/USD moves ahead of a speech from the Bank of England’s (BOE) Deputy Governor for Financial Stability Sir Jon Cunliffe. Also important to watch is the US CB Consumer Confidence for June, prior 106.4. Above all, Wednesday’s ECB Forum is the key as major central bankers from the BOE and the Fed are scheduled to debate the monetary policies.

Technical analysis

GBP/USD remains firmer beyond convergence of the 50-SMA and a fortnight-long support line, near 1.2255 by the press time. However, the 100-SMA hurdle on the four-hour chart, near 1.2310 by the press time, limits the short-term advances of the pair buyers.