GBP/USD defends 1.40 despite election, Brexit jitters, UK GDP eyed

• GBP/USD trims intraday gains after refreshing 10-week top.
• Scottish independence referendum is a matter of when and not if, Tories did well in local government elections.
• UK’s Truss expects ‘roaring twenties’ Brexit-boom outside EU, Gilbertar, freeports and fisheries trouble policymakers of late.
• UK GDP will be the key for this week but BOE’s Bailey may offer intermediate entertainment.

GBP/USD edges higher around 1.4020, up 0.27% intraday, while heading into Monday’s London open. The cable jumped to the fresh high since late February earlier in Asia. However, the US dollar’s dead-cat bounce joins the UK’s political and Brexit tensions to test the bulls.

UK Prime Minister Boris Johnson seemed to have benefited by faster covid vaccinations in the latest elections. With a third of British adults completed their jabbing, Tories won an extra 290 seats to 2,198, including the landmark victory in Hartlepool. Labour Party, on the other hand, lost 247 more seats to grab 1,268 places. It should, however, be noted that Scotland’s First Minister Nicola Sturgeon won a fourth term as the National Leader and is determined to call on the second referendum. Though, the UK Senior British minister Michael Gove refused to say on Sunday, per WION news, how the government would react if the Scottish parliament were to pass a bill calling for a referendum on independence from the United Kingdom.

Elsewhere, Brexit talks remain gloomy as, “A furious diplomatic row risks breaking out as negotiations regarding the position of Gibraltar post-Brexit have stalled - with UK officials blaming the EU,” said the UK Express. Additionally, Financial Times (FT) marked hardships for eight new English freeports as the latest post-Brexit trade deals include clauses that specifically prohibit manufacturers in freeport-type zones from benefiting from the deals. It should be noted that the chatters that some English pensioners in Spain were refused for the covid jabs trigger fresh woes.

Even so, the UK’s International Trade Secretary Liz Truss was cited by the UK Express as saying that she had seen some “fantastic economic forecasts” for the UK in the coming months ahead as she praised British businesses' “incredible” adaptation to Brexit and the COVID-19 pandemic.

Additionally, Britain’s faster jabbing also helps the nations to revisit the lowest infections since September but UK PM Johnson is pushed to join the US and the European Union (EU), as far as support for the covid vaccine patent waiver is concerned. It’s worth mentioning that the UK terms the Indian strain of the coronavirus (COVID-19) as the ‘variant of concern’.

On the other hand, the US policymakers cheer surprisingly downbeat US jobless report as it adds strength to the defense of easy money. However, the vaccine optimism in the EU and Australia, of late, join mixed catalysts elsewhere to help the US dollar index (DXY) lick its wounds around late February lows.

Looking forward, Wednesday’s UK GDP becomes the key concern for GBP/USD traders this week as markets expect -6.0% figures versus -7.3% prior. In the meantime, BOE Governor Andrew Bailey’s multiple speeches and risk catalysts also become the key to keep buyers hopeful.

Technical analysis

A clear break of 1.4010-20 area including multiple tops marked since early March, enables GBP/USD buyers to aim for 1.4080 and 1.4150 ahead of targeting the yearly top surrounding 1.4245. Alternatively, the 1.4000 may offer intermediate support during a pullback but the cable’s downside below April’s high of 1.3976 could favor short-term sellers.