GBP/USD: Brexit woes, firmer yields favor sellers near 1.3400, UK/US PMIs eyed

GBP/USD consolidates losses made during the last two days around 1.3400 during the initial Asian session on Tuesday. While US President Joe Biden’s nomination for the Fed Chair’s position recently weighed on the cable pair, Brexit jitters and the COVID-19 fears add to the bearish bias for the quote ahead of the UK and the US preliminary PMI numbers for November.

With no breakthrough on the Northern Ireland (NI) border talks with the European Union (EU), UK’s Brexit Minister David Frost said, per Sky News, “We can't carry on as we were before." UK's Lord Frost adds, "If, after Brexit, all we do is import the European social model, we will not succeed.” The policymaker also highlights that the NI border talks are his “top priority”.

On a different page, Independent came out with the news citing French warning to the UK as the fishing raw escalates among the old neighbours. “France has told the UK it is in its ‘best interest to settle’ the post-Brexit fishing dispute, saying if the two countries are to work together the UK must remain “true” to their word,” said the news.

Elsewhere, US President Joe Biden’s decision to nominate Jerome Powell for another term as the Federal Reserve (Fed) Chair and Richard Clarida for Vice-Chairman buoyed market sentiment the previous day. The traders’ zeal propelled US Treasury yields amid hopes of faster tapering and a rate hike during 2022, which in turn fuelled the US Dollar Index (DXY) to a new multi-day high.

Against this backdrop, US 10-year Treasury yields rose more than the previous week’s loss in a single day while the Wall Street benchmarks also posted mild gains by the end of Monday’s North American session. That said, S&P 500 Future rise 0.12% intraday at the latest.

Looking forward, the UK employment, inflation and retail sales data have already fuelled the concerns that the Bank of England (BOE) will soon announce a rate hike. Hence, today’s UK PMIs for November will also be important to confirm the market’s bullish bias for the GBP/USD. However, the Fed rate lift concerns are stronger and may keep the quote pressured. Also challenging the pair buyers is the latest covid woes in Eurozone and the UK. Of late the coronavirus infections are on a spike in Britian even as the virus-led deaths recede, which in turn highlight fears of another round of local lockdowns. 

Technical analysis

Unless rising past Thursday’s swing high, around 1.3515, GBP/USD bears stay directed towards a descending support line from late July, near 1.3290 by the press time.