GBP/USD seesaws around 1.2300 with eyes on UK PM Johnson’s speech
|- GBP/USD fails to stretch early-day recovery moves beyond 1.2317.
- Brexit talks continue with the UK insisting on an outline deal by July-end.
- China’s passage of the Hong Kong Security Law suggests fresh Beijing-London row.
- UK PM Johnson’s infrastructure investment plan, UK GDP and Brexit talks remain in the spotlight.
GBP/USD takes rounds to 1.2300 while heading into the London open on Tuesday. The Cable dropped to the lowest since May 28 the previous day after traders rushed to the US Dollar and Brexit negations offered a bump in the start. Even so, the quote bounced ahead of UK PM Boris Johnson’s anticipated $6.15 billion infrastructure plan. Additionally, the second estimate of the UK’s Q1 2020 GDP and Fed Chair’s testimony are extra catalysts for the pair traders to watch.
The six-week-long negotiations between the UK’s David Frost and his European counterpart Michel Barnier started in Brussels on Monday and will continue for the whole week. During the first day of talks, Britain made it clear that they want a raw deal in a month while the bloc leaders tried not to disappoint the guest despite not welcoming the idea. It’s worth mentioning that the UK Expressed rolled out an update saying that French fishers stay ready to defy the Brexit deal if it stops them from fishing in the British waters.
Elsewhere local lockdown in Leicester renews the fears of the coronavirus (COVID-19) resurgence. Further, the Sydney Morning Herald came out with the news suggesting that the British firms are being warned to review their China supply chains amid concerns of "demographic genocide" against the Uighur minority. This indicates further tension between the UK and China as the dragon nation recently passed Hong Kong Security Law that Britain has already opposed. In this regard, UK’s Jim Shannon said, per BBC, that China breached the Hong Kong Handover deal, it’s time the UK acted like it.
The market’s risk-tone remains mildly positive despite China’s rush to gain more power in Hong Kong and the virus outbreak. While portraying the same, the US 10-year Treasury yields seesaw near 0.63% whereas US stock futures and Asian share mark gains as we write.
Looking forward, the UK GDP for Q1 2020, expected to remain unchanged around -2.0%, will be the first one to entertain the pair traders. Following that, UK PM Johnson’s “build, build, build” and Fed Chair Jerome Powell’s “extraordinarily uncertain” will be the keys to watch. Also likely to entertain the pair traders will be US Consumer Confidence and Chicago Purchasing Managers’ Index, as well as US Treasury Secretary Steve Mnuchin’s Testimony.
Considering the plethora of factors playing their role side-by-side, the pair is likely to remain liquid for the rest of the day. However, the bears aren’t expected to lose the grip unless anything positive erupts from Brexit, which is less expected.
Technical analysis
Unless bouncing back beyond a 50-day SMA level of 1.2415, the quote is less likely to avoid visiting May month low near 1.2075.
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