GBP/USD: Mildly bid above 1.3800 amid covid, Brexit woes, focus on US data
|- GBP/USD defends 1.3800 threshold, mildly bid of late.
- UK PM Johnson supports fresh tax plan to favor social care, holds onto July 19 unlock despite covid cases jump.
- EU-UK jostles over Brexit bill, BOE urged to tame inflation.
- Comments from EU’s von der Leyen’s NI visit, US consumer-centric data will be the key.
GBP/USD picks up bids to 1.3838, up 0.08% near intraday high of 1.3840, ahead of Friday’s London open. The cable pair dropped the previous day amid mixed clues from the Bank of England (BOE) and the US Federal Reserve (Fed) policymakers, not to forget Brexit and coronavirus (COVID-19) concerns. However, the recent optimism over the UK unlock and USD pullback seems to favor the quote’s recovery.
Michael Saunders, a policymaker from the Bank of England said that during the upcoming months, they would discuss whether to curtail the current assets purchase program and/or take further policy action next year. On the other hand, Fed Chair Jerome Powell reiterated defensive comments over the US central bank’s current monetary policy.
The market’s confusion also took clues from the mixed UK jobs report as the UK registered a higher Unemployment Rate for three months to May and a slower reduction in the Claimant Count Change the previous day. Before that, inflation figures did favor the need for hawkish BOE.
Elsewhere, The European Union (EU) and the UK recently argued over the Brexit bill as British diplomats estimate a value that’s lower by £3.5 billion. Additionally, the UK marked over 50,000 cases to refresh, unfortunately, the highest infections since January but PM Boris Johnson said, per Independent, that it was "highly probable" the worst of the pandemic is over.
On the positive, a story from The Times, signaling UK PM Johnson's support to a new tax system to pay for reforms in social care, seems to offer fresh stimulus and helps the GBP/USD prices. It should be noted that the early-day report from the Financial Times signal the UK’s House of Lord’s push to the Bank of England (BOE) to tame the inflation, which in turn favor the cable buyers.
Amid these plays, stock futures reverse the early Asian losses and US Treasury yields snap a two-day downtrend, which in turn weigh on the US Dollar Index (DXY).
Looking forward, comments from EU’s von der Leyen and risk catalyst will entertain GBP/USD traders ahead of the US Retail Sales for June, likely +0.4% versus -0.7% prior, as well as expectedly strong the preliminary readings of the Michigan Consumer Sentiment Index, to 86.5 versus 85.5 previous readouts.
Read: US June Retail Sales Preview: Analyzing major pairs' reaction to previous releases
Technical analysis
GBP/USD pares Thursday’s losses following its bounce off a two-week-old horizontal support zone surrounding the 1.3800 round figure. Even so, MACD conditions aren’t favorable to the pair’s further upside, which in turn suggests fresh pullback from nearby resistances, namely 1.3875-80 and the 1.3900 round figure. Alternatively, a downside break of the 1.3800 nearby support will direct sellers to attack the weekly channel’s support close to 1.3780.
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