GBP/USD: AUKUS, UK PM Johnson’s reshuffle test bulls around 1.3850, US Retail Sales eyed

• GBP/USD fades recovery moves, the heaviest in one week amid mixed clues.
• Australia, UK, US sign trilateral pact to keep China in check, UK PM Boris Johnson clarifies team reshuffle.
• Market sentiment dwindles amid recent geopolitical headlines, Brexit and covid news also probe bulls.
• US Retail Sales for August can add conviction over Fed tapering concerns.

GBP/USD struggles to keep the rebound from a weekly low of around 1.3850 during Thursday’s Asian session. The cable pair posted the heaviest upside in a week following a broad US dollar downside amid the risk-on mood. However, the latest challenges to the market sentiment and caution ahead of another important data to determine the Fed’s next move question the upside moves.

Market sentiment improved post-US Consumer Price Index (CPI) for August that weakened the most since January, shrugging off chatters surrounding the US Federal Reserve’s (Fed) monetary policy adjustments. Earlier in the month, the jobs report also came in weaker and backed the easy-money policies of the Fed ahead of the next week’s Federal Open Market Committee (FOMC) meeting.

Additionally favoring the pair buyers were the stronger UK CPI data, increasing odds of the Bank of England’s (BOE) tapering concerns. Furthermore, the US invitation to the UK and the British trade deal talks with Australia and India are some of the extra positives for the GBP/USD prices.

On the contrary, fears of fewer healthcare benefits for the Scottish people due to the Scottish National Party (SNP) oppose to the Brexit bill joined the UK’s another delay in post-Brexit border checks and a rift with the bloc over Northern Ireland to challenge the GBP/USD bulls.

Additionally, UK PM Boris Johnson’s readiness to shuffle the top team to better battle the covid outbreak hints at the preparations for the third wave. It should be known that Britain reports 30,597 infections and 201 virus-led deaths as Sky New said, “The latest figures compare with 26,628 cases and 185 more deaths announced yesterday and 38,975 infections and 191 fatalities recorded this time last week.”

Also negative for the cable buyers is the UK’s trilateral pact with the US and Australia (termed as AUKUS) over security arrangements that indirectly challenge China. While responding to the same, China’s US embassy said, “The three should shake off their cold war mentality and ideological prejudice.”

Amid these plays, stock futures fade earlier optimism whereas the US 10-year Treasury yields ease as well.

Moving on, US Retail Sales become the key for GBP/USD traders while chatters surrounding covid and geopolitics will be important too.

Read: US August Retail Sales Preview: Can gold turn bullish on a weak print?

Technical analysis

Although 50-DMA restricts short-term downside around 1.3810, GBP/USD bulls need a daily closing beyond 1.3915, comprising 100-DMA to keep controls.