GBP/USD extends post-NFP losses towards 1.3500 as Brexit talks, UK Q4 GDP eyed

GBP/USD pares intraday losses around 1.3530, despite staying on the back foot the second consecutive day heading into London open on Monday.

The cable pair dropped the heaviest in a week the previous day as the US Dollar Index (DXY) rebounded from a three-week low after the monthly employment data release. Also weighing on the quote are the negative concerns surrounding Brexit and the UK politics, as well as cautious sentiment ahead of Thursday’s Brexit talks between UK Foreign Secretary Liz Truss and European Commission vice-president Maros Sefcovic, not to forget Friday’s preliminary reading of the UK Q4 GDP.

Friday’s DXY rebound could well be linked to the positive surprise from the US Bureau of Labor Statistics (BLS), concerning January employment data. That said, the headline Nonfarm Payrolls (NFP) rose by 467K versus the median forecast for a 150K rise and 510K revised prior while the Unemployment Rate rose to 4.0% from 3.9% in December, compared to expectations for a no-change figure. It’s worth noting, however, that the U6 Underemployment Rate extended the south-run to 7.1% from 7.3% previous readouts. Also encouraging was Average Hourly Earnings that jumped strongly to 5.7% versus 4.9%.

At home, fishermen eked out pessimism over Brexit deadlock while UK Prime Minister Boris Johnson is said to have hired a "mastermind" Isaac Levido to save his job, per the UK Express. Elsewhere, the World Health Organization’s (WHO) Europe region Director Dr. Hans Kluge said, per Sky News, “for now, the number of deaths across the region is starting to plateau". Additionally, Gerard Lyons, a former economic advisor to both Gordon Brown and Boris Johnson, criticized Bank of England Governor Andrew Bailey’s slow actions during his interview with The Times on Sunday. The key economist cited Bailey’s failing to “nip inflation in the bud” and taking a “complacent attitude” towards rising prices – as he warned the Bank’s failures will worsen the cost-of-living crisis.

Following the US jobs report, the US 10-year Treasury yields rose to the highest levels in two years before recently easing to 1.90%. The equities, however, remain sluggish after surprising markets with a positive daily close on Friday.

Moving on, a light calendar during the early week may allow GBP/USD traders to take a breather after a volatile week. However, escalating Brexit tension and a disappointment from UK GDP may recall the pair bears.

Technical analysis

GBP/USD remains below 21-DMA and the 61.8% Fibonacci retracement (Fibo.) level of October-December 2021 downside, respectively around 1.3555 and 1.3580.

Given the steady RSI and the pair’s inability to stay beyond the key resistances, the latest declines are likely to extend towards the nearby support, namely the 100-DMA level surrounding 1.3510 and the 1.3500 threshold.