GBP/USD hovers around 1.3250 as bulls doubt Brexit, BOE positives

GBP/USD treads water around 1.3255-60 during the early Asian session on Tuesday, following a positive daily performance.

The cable pair fades the recovery strength as sluggish market sentiment and a lack of major catalysts challenge the buyers’ previous optimism surrounding Brexit and the Bank of England’s (BOE) next move. Also positive for the quote were receding fears of the South African covid variant, dubbed as Omicron, as well as hopes of finding a cure to the virus strain.

The UK Telegraph quotes sources to signal that the British diplomats are ready, even hesitantly, to offer more fishing licenses to the French fishermen to ease the Brexit drama surrounding Channel. The anticipated British move could be in response to the news, shared by the UK Express, that says, “Ireland is to receive €920 million from an EU fund set up to mitigate the impact of Brexit.”

Elsewhere, Sky News quotes the UK’s leading scientist, Professor Francois Balloux, director of the University College London Genetics Institute to mention, “The outbreak was now well underway, doubling every three to four days, adding it will quickly put the NHS under pressure.” As per the latest official figures, shared by Reuters, 51,459 further cases of COVID-19 and 41 more deaths within 28 days of a positive test were reported versus 43,992 cases and 54 deaths marked the previous day. “Britain's Health Security Agency said it found 90 new cases of the Omicron variant of COVID-19, taking the total number identified so far to 336,” said the news.

It should be noted that the Bank of England (BOE) Deputy Governor Ben Broadbent’s hawkish comments also strengthened the GBP/USD prices. “Inflation is likely to soar “comfortably” above 5% next spring when the energy regulator Ofgem raises a price cap affecting millions of households,” said BOE’s Broadbent.

On a broader front, receding fears of the virus variant and hopes of finding a cure joined an absence of Fed rate hike chatters to favor the GBP/USD bulls. However, sluggish market conditions challenge the pair’s moves of late, highlighting the need for fresh catalysts. As a result, second-tier UK data concerning Retail Sales and housing may gain attention. Though, headlines covering Brexit and Omicron will be the key.

Technical analysis

A downward sloping trend line from late October, near 1.3280 at the latest, directs GBP/USD prices towards December 2020 lows near 1.3135. During the fall, the yearly bottom surrounding 1.3200 my offer an intermediate halt.