GBP/USD in the hands of US pres Biden around G7 /Irish border

GBP/USD is pressured on Tuesday, falling 0.18% at the time of writing to 1.4150 from a high of 1.4184 to a low of 1.4120. 

The pound is in a phase of consolidation and flows are driven through the US dollar with the market's attention split between the reopening of the UK economy and the US Federal Reserve.

Cable has been oscillating in consolidation and sideways channel within the  $1.41-$1.42 range.

The pound has benefitted in recent weeks as investors back the UK on speculation of a faster reopening of the economy on the back of its vaccination programme.

In fact, the pound has been one of the best performing G10 currency against the dollar this year, lagging to only the commodity-driven Canadian dollar.

However, we have seen a slight recovery attempt in the greenback which has rallied 1% in the month of June so far as measured against a basket of currencies in the DXY index. 

Strong incoming US economic data has propelled the Us dollar forward on expectations of a potential tightening from the Federal Reserve.

Additionally, the pound has been pressured on fading hopes of an imminent reopening of the UK economy

Reopening hopes had faded somewhat in recent weeks due to the rising cases of the Delta variant of COVID-19 first detected in India.

Health minister Matt Hancock said on Sunday it was too soon to say whether the June 21 plan could go ahead.

''Such speculation has already produced a warning from the hospitality industry about the potential for non-survival for many more firms,'' analysts at Rabobank explained. 

''Although UK consumer confidence has been upbeat in recent weeks, the rebound is in danger of being hampered either by a delay to the lifting of restrictions or by an increase in Covid cases.''

In other recent data shown on Tuesday, British retailers reported a big boost in sales in May, after lockdown measures ended and a further relaxation of COVID restrictions on hospitality drew more shoppers into town centres.

The British Retail Consortium said total sales among its members, who include supermarkets and high-street chains, were 10.0% higher last month than in May two years ago.

Meanwhile, tensions between the UK and the EU regarding the implementation of the Northern Ireland protocol will be a focus for the week (or possibly for weeks ahead) as the problems surrounding its implementations will be a topic of discussion between the US President Job Biden and PM Boris Johnson ahead of the G7 summit in Cornwall starting on June 11. 

''There is speculation in the press that Biden could again tell Johnson that a UK/US trade deal could be in jeopardy if the protocol is not implemented by the UK.,'' analysts at Rabobank explained. 

''UK press are speculating that the EU could be at the brink of a trade war with the UK if the Johnson government unilaterally extends the grace period in the Northern Ireland protocol.  More generally, it is possible that any involvement from Biden this week will raise awareness of the difficulties that the UK is having not just with the protocol but also with other trade negotiations post Brexit.''

As for positioning,  overall positioning on sterling remains net long, which means that the market is on balance betting for it to make gains. However, this could come undone if trade tensions garner media and financial markets attention. 

''A year ago, the UK government had hoped that a US/UK trade deal would be an early Brexit success.  These hopes dwindled as Trump exited the White House,'' the analysts at Rabobank argued.