GBP/USD steadies near 1.3750 after the heaviest fall since June, UK CPI, FOMC Minutes eyed
|- GBP/USD bears take a breather after cheering the best party in five months.
- Broad USD strength, backed by risk-off mood, favors the sellers.
- UK jobs report couldn’t recall bulls amid Brexit, covid woes at home.
- UK CPI may clarify BOE’s hawkish stand, FOMC Minutes should be watched for taper tantrums.
GBP/USD seesaws around 1.3740 amid a sluggish early Asian session on Wednesday, after dropping the most since June the previous day. Although a lack of fresh catalysts and cautious sentiment ahead of the key data/events probe the pair sellers, risk-off mood and downbeat catalysts for the UK keep the sellers hopeful.
The risk-aversion wave propelled the US dollar versus major currencies and dragged down the GBP/USD prices the previous day even as the UK flashed upbeat employment figures. That said, the US Dollar Index (DXY) rose 0.56% to end Tuesday’s North American session around 93.15 during the two-day uptrend.
The UK’s headline Unemployment Rate for three months to June dropped below 4.8% expected and prior to 4.7% but the Claimant Count Change dropped below -114.8K previous readouts to -7.8K in July. it’s worth noting that the Average Earnings improved during the three months to June.
In addition to the Delta covid variant woes that underpin the US dollar’s safe-haven demand, downbeat US Retail Sales and fears of Fed tapering also propelled the DXY prices on Tuesday. In doing so, the greenback ignored a bit softer US Treasury yields.
At home, the UK marked the highest virus-led deaths since March and approved Moderna’s covid vaccine shot for 12 to 17-year-olds. On the other hand, German media’s allegations over the UK’s stubborn behavior and downbeat comments from the UK’s House of Commons Leader Jacob Rees-Mog portray Brexit woes and drag the GBP/USD prices. “Jacob Rees-Mogg insisted the EU must not at any stretch think they can "annex" Northern Ireland from the United Kingdom as he set about a furious defense of Great Britain's interests,” said the UK Express.
Looking forward, the UK’s mixed employment data, mostly upbeat, keep the Bank of England (BOE) policymakers hopeful for a tighter monetary policy going forward. However, today’s UK Consumer Price Index (CPI) for July, expected 2.2% versus 2.5% will be the key to follow. Also important will be the monetary policy meeting minutes for the latest Federal Open Market Committee (FOMC).
Technical analysis
A daily closing below 200-DMA, around 1.3785, redirects GBP/USD bears toward six-month-old horizontal support around 1.3566–72.
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