GBP/USD retreats towards monthly bottom below 1.4100, focus UK CPI, Jerome Powell

GBP/USD refreshes intraday low to 1.4077 within a choppy range below 1.4100 during Wednesday’s Asian session. The cable pair dropped to the lowest in a month the previous day before bouncing off 1.4034. However, chatters surrounding UK’s covid conditions and Brexit woes join the pre-data/event cautious sentiment to weigh on the quote of late.

As per The Telegraph, “Experts on the country's Joint Committee on Vaccination and Immunisation (JCVI) are understood to be preparing an interim statement for release as soon as the end of the week following a meeting yesterday.” The news poses extra challenges for the UK’s covid conditions as it battles the Delta variant spread that recently pushed back unlock deadline by four weeks.

On the other hand, the UK Mirror quotes Think tank UK In A Changing Europe while saying, “Hundreds of thousands of EU citizens entitled to settle in the UK may miss the post-Brexit deadline to apply and be left in legal limbo.” This suggests a looming Brexit risk and fresh tussles even when the key issues like Northern Ireland (NI) protocol are unsolved.

Recently, Reuters came out with the news, quoting Ireland’s Foreign Minister Simon Coveney, while mentioning that Ireland expects that Britain's approach to Brexit talks with the European Union is likely to change and improve following pressure exerted by international partners at the Group of Seven (G7) summit at the weekend.

It’s worth noting that the UK’s upbeat employment report couldn’t recall GBP/USD buyers on Wednesday as US figures concerning Retail Sales and Producer Price Index (PPI) kept reflation risk on the table. Also exerting downside pressure on the pair could be the market’s cautious sentiment ahead of the key UK inflation figures and the US Federal Open Market Committee (FOMC) meeting.

Read: Federal Reserve Preview: First up, then down? Playbook for trading the Fed

That said, US stock futures and the Treasury yields look for fresh clues by the press time.

Moving on, the expected increase in the UK Consumer Price Index, from 1.5% to 1.8% YoY, could help the Bank of England (BOE) policymakers to retain their bullish bias, which in turn may trigger the GBP/USD pair’s bounce from the short-term key support line. However, pre-Fed trading lull may restrict the traders’ to the data.

Technical analysis

GBP/USD remains pressured towards a two-month-old support line around 1.4075 but the further downside will be questioned by the 50-day EMA level of 1.4042 and the 1.4000 threshold. Meanwhile, recovery moves need to cross the monthly resistance line near 1.4160 to convince the pair buyers.