GBP/USD: Modestly positive above 1.2900 ahead of UK GDP

• GBP/USD await fresh clues to extend the previous day’s recovery.
• The post-Brexit drama between the UK and the EU continues, the Irish election is the additional ones to watch.
• The UK data dump, Carney’s speech and Fed Chair Powell’s Testimony will be the key while coronavirus updates could keep filing the gaps.

GBP/USD trades near 1.2915, +0.03%, while heading into the London open. While the market’s worry ahead of the key data/events keeps the pair under pressure, the US dollar’s pullback and recovery in risk-tone seem to help the pair off-late.

The EU-UK drama over Brexit continues as The Daily Telegraph conveyed the list of post-Brexit punitive measures by the Brussels whereas Duchy of Lancaster Michael Gove reiterates the call of border checks in case of a hard Brexit. Further, UK Finance Minister Sajid Javid showed readiness to push for ‘permanent equivalence’ for City in Brexit talks, as per the Financial Times. Moreover, the results of the Irish election, even if left for the final reading, indicates hard time for the Taoisch Leo Vardakar.

Further, the risk-tone recovers amid China’s liquidity push and Global Times’ news that scientists in Shanghai recently have isolated strains of the novel coronavirus, which experts said will boost the development of vaccine and medicine against the virus. That said, the US 10-year treasury yields rise 1.6 basis points (bps) to 1.563% whereas Asian stocks also recover Monday’s losses by the press time.

Looking forward, the UK’s data dump for December, including Trade Balance, Industrial Production and Manufacturing Production, will be important to read considering the latest upbeat British data pushing BOE off from its bearish bias. However, the key will be the preliminary reading of the fourth quarter (Q4) Gross Domestic Product (GDP). The growth measure is expected to soften to 0.8% YoY from 1.1% earlier whereas QoQ GDP will shrink to 0.0% from 0.4% earlier. Additionally, the BOE’s Governor Mark Carney will also speak at the UK parliament and might reiterate his dislike for the Brexit.

On the other hand, the US Fed Chair’s Testimony before the House Financial Services Committee will be crucial as the US fundamentals could help the Fed supremo to ignore coronavirus fears. Though, how smartly Powell manages to elope the US President Trump’s push for further rate cuts should be watched closely.

Other than the data/events on the economic calendar, the UK PM Johnson’s appearance in the House of Commons will also be the key as the Tory leader is expected to unveil fresh infrastructure spending plans. Further, expectations that are also high that the Tories will offer details of how they can push for “permanent equivalence” for the city of London in the Brexit talks with the EU.

Technical Analysis

Unless providing a successful run-up beyond a 100-day SMA level of 1.2910, the pair’s recovery to January month low near 1.2955 and then to 1.3000 mark seem less expected. As a result, the bears may target November 2019 bottom close to 1.2820 during the fresh declines below Monday’s low of 1.2872.