GBP/USD: Bears keep eyes on 1.3900 as bond rout prepares for restart
|- GBP/USD stands on the slippery ground, refresh one-week low.
- US dollar picks up bids as corrective pullback in bond prices seems to fade.
- EU-UK stays at the loggerheads over the NI border, UK PM Johnson pressured to repeal the Brexit NI protocol.
- BOE’s Ramsden, US stimulus and PCE data eyed.
GBP/USD drops to the fresh weekly low of 1.3944, currently down 0.37% intraday around 1.3955, while heading into the London open on Friday. In doing so, the cable reacts to the US dollar’s latest run-up amid receding weakness in the Treasury yields. Also on the negative side could be Brexit-related chatters as well as hopes of US stimulus.
US 10-year Treasury yields halt pullback from the yearly top while the UK counterparts waver around the 11-month top. Although comments from the Fed tried to placate bond bears, which worked during early Asia, the overall downside sentiment remains on the table.
Read: Treasury yields havoc prevails in Asia, 10-year JGB poke October 2018 top
Other than the government bond moves, Brexit chatters also weigh on the Cable as neither the European Union (EU) nor the UK is ready to compromise over the Northern Ireland (NI) border. While portraying the disappointment, Northern Ireland's First Minister Arlene Foster said the protocol had "completely ruptured the flow of goods from Great Britain to Northern Ireland", per The Mirror.
Elsewhere, UK carmakers seek more government support, mainly due to the dampening demand, whereas the house markets regain momentum as British stimulus help people save and purchase new homes.
Amid these plays, the UK lowers COVID-19 alert status as pressure on hospitals eases, said Reuters. However, vaccine allegations by the bloc on the US and the UK keep the risks high.
Above all, the Treasury yields exert downside pressure on the UK and the US stock futures while also favoring the US dollar index (DXY) ahead of the stimulus talk in the American house. Also important will be the US Core Personal Consumption Expenditure (PCE) - Price Index for January, expected 1.4% YoY versus 1.5% prior, as the figures will justify the reflation fears and provide direction to the global bonds.
Technical analysis
Sustained break of a three-week-old support line directs GBP/USD sellers toward a 21-day SMA level of 1.3860. Meanwhile, 10-day SMA joins the support-turned-resistance to highlight the 1.4000 as the key short-term hurdle.
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