GBP/USD drops below 1.2000 on USD rebound, focus on UK Retail Sales, PMIs
|- GBP/USD takes offers to refresh intraday low, reverses the previous day’s corrective pullback.
- DXY pares the first weekly loss in four as traders await flash US PMIs for July, FOMC.
- Political, Brexit crisis in the UK keeps bears hopeful ahead of British Retail Sales for June, Flash PMIs for July.
GBP/USD pares the first weekly gains in four as it takes offers around 1.1960 to refresh intraday low heading into the London open on Friday. The Cable pair’s latest weakness could be linked to the US dollar’s broad recovery ahead of the next week’s Federal Open Market Committee (FOMC). Also weighing on the quote could be the cautious sentiment ahead of the key UK Retail Sales for June and preliminary readings of the UK and the US S&P Global PMIs for July. Additionally, political anxiety and Brexit fears are extra burdens for the pair.
That said, the US Dollar Index (DXY) picks up bids to refresh its intraday high around 106.95, up 0.35% on a day, as sour sentiment joins sluggish yields to help the greenback pare latest losses. Even so, the DXY braces for the first weekly loss in four while extending the July 14 reversal from a nearly two-decade high. The greenback’s recent weakness could be linked to the US Treasury yields as the benchmark 10-year bond coupons marked the biggest daily slump since mid-June the previous day, as well as eyes the second consecutive weekly loss.
At home, a tough battle for the Prime Minister’s status between ex-Chancellor Rishi Sunak and Foreign Minister Liz Truss appears to challenge GBP/USD bulls. Recent updates from the UK express hints at the market’s favoritism for Sunak due to his concrete policies. It’s worth noting that Liz Truss appears less welcomed by the European Union (EU) as they fear harsh Brexit policies.
Elsewhere, the UK’s House of Lords couldn’t pass the Northern Ireland Protocol (NIP) bill and hence increased the GBP/USD weakness.
Doubts over the European Central Bank’s (ECB) ability to tame regional crisis with rate hikes joins the Bank of England’s (BOE) limited capacity to act to weigh on Cable prices.
Hence, today’s UK data gains more attention if it manages to please bears. Alternatively, upbeat British data may not favor the Cable buyers much considering the hawkish expectations from the Fed and comparatively upbeat fundamentals of the US than the UK.
Technical analysis
The 21-DMA, around 1.2020 by the press time, exerts downside pressure on the GBP/USD, which in turn highlights the 1.1930 horizontal support before directing the bears towards the yearly low of 1.1760. That said, the 1.2045-55 area acts as an extra upside filter.
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