GBP/USD: Depressed below 1.3800 amid Brexit woes, US dollar strength
- GBP/USD snaps two-day winning streak, mildly offered near intraday low.
- Over a quarter of the UK’s small exporters avoid doing business with the EU.
- Mixed clues over Britain’s vaccine offer to Ireland battles UK’s 30 million first jabbing.
- Sino-American tussles, virus woes in European weigh on sentiment and favor the US dollar.
GBP/USD holds lower ground near 1.3780, down 0.06% intraday, while heading into the London open on Monday. Alike other majors, the cable also bears the burden of the US dollar strength. However, a battle of Brexit woes and the vaccine optimism in Britain seems to placate the sellers amid a quiet session.
US dollar gains highlighted amid mixed moves…
Having stepped back from the yearly top on Friday, the US dollar index (DXY) regains its upside momentum amid a risk-off mood. Among the major catalysts, the Sino-American tussle and the coronavirus (COVID-19) updates are the keys.
Following the US Trade Representative (USTR) Katherine Tai’s rejection of any immediate tariff relief for China, the dragon nation criticized the Western alliance including the US, the UK, Canada and the European Union (EU) to destabilize China. Elsewhere, German Chancellor Angela Merkel pushed for Federal law amid the need for a lockdown to tame the covid. Also, French doctors warn over the highest virus-infected patients in the Intensive Care Unit (ICU) in 2021.
On the other hand, mixed signals flash over the UK’s alleged vaccine offer to Ireland after it has successfully jabbed 57% of all adults.
Talking about Brexit, the Bank of England (BOE) recently asked lenders to seek approval from the “Old Lady”, before relocating UK jobs or operations to the EU. The Financial Times (FT) cites European regulators’ push for more to move than is necessary for financial stability after Brexit as the reason for the BOE’s action. It should be noted that the EU and the UK have recently concluded to hold a bi-annual forum-based approach towards tackling the issue of financial services regulation. It should be noted that a survey from the UK’s Federation of Small Businesses (FSB) suggests Quarter of small exporters give up on the EU due to red tape.
Amid these plays, stock futures are offered and the US 10-year Treasury yield takes offers around 1.66%.
Given the lack of major data/events, GBP/USD moves should rely on the risk barometers wherein headlines concerning vaccine and China could gain major attention.
Technical analysis
Given the RSI staying firm around 45.00, the quote’s run-up targeting 50-day SMA, near 1.3840, can’t be ruled out. However, a clear break above this will have to cross a one-month-long resistance line, at 1.3887 by the press time, to recall the GBP/USD bulls. Alternatively, a confluence of the stated support line and 50% Fibonacci retracement level of run-up from December 11, 2020, to February 24, 2021, near 1.3685-80 becomes a tough nut to crack for the bears.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
