- Persistent no-deal Brexit fears continue to weigh on the British Pound.
- Carney’s dovish comments further dent the already weaker sentiment.
- Traders now eye UK services PMI/US macro releases for a fresh impetus.
The British Pound was one of the worst-performing major currencies on Tuesday and was weighed down by a combination of negative forces. Against the backdrop of persistent fears of a no-deal Brexit, the already weaker sentiment deteriorated further following the awful release of UK construction PMI. Business activity in the UK construction sector recorded its steepest decline since April 2019 amid heightened political and economic uncertainty, which added to the previous session's dismal UK manufacturing PMI and kept exerting some downward pressure on the Sterling.
The GBP/USD pair extended its recent pullback from over one-month high level of 1.2784 and was further pressurized by the Bank of England Governor Mark Carney's cautious remarks on the economic and policy outlook. In a prepared speech on Tuesday, Carney said that global trade war and a no-deal Brexit were growing risks to Britain's economy, which might need more monetary support to cope with a downturn. Carney's dovish comments prompted investors to increase their bets on central bank easing and dragged the pair to near two-week lows, around the 1.2585 region.
On the other hand, a fresh wave of global risk-aversion trade - amid fading optimism over the US-China trade truce and resurfacing trade war fears, kept the global bond yields depressed. In fact, the yield on the benchmark US Treasury bond yields brushed a fresh 2-1/2-year low and kept the US Dollar bulls on the defensive, though did little to lend any support or ease the prevailing bearish pressure surrounding the major. Bears took some breather during the Asian session on Wednesday and now look forward to the UK services PMI for some fresh impetus.
Later during the early North-American session, the US economic docket - featuring the releases of ISM non-manufacturing PMI and ADP report ton private sector employment, might further contribute towards producing some short-term trading opportunities. Being a leading indicator for Friday's official jobs report - NFP, the ADP report might play an important role in influencing the intraday USD price dynamics and provide some meaningful impetus.
From a technical perspective, the overnight break below the 1.2610-1.2600 region (61.8% Fibo. level of the 1.2506-1.2784 recent corrective bounce) sets the stage for a move back towards challenging the key 1.2500 psychological mark with some intermediate support near the 1.2540-30 region. A follow-through selling, leading to a subsequent weakness below the 1.2475 level might now turn the pair vulnerable to slide further towards retesting sub-1.2400 level, or yearly lows set in early-January.
On the flip side, the 1.2600-10 support breakpoint now seems to act as an immediate resistance, which if cleared might lift the pair further towards the 1.2645-50 supply zone – coinciding with 50% Fibo. Level. Momentum beyond the mentioned hurdles might prompt some near-term short-covering move, though any further up-move seems more likely to remain capped near the 1.2700 round figure mark.
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