GBP/USD nears five-month low amid global rout, BOE minutes in focus

Amid the broad risk aversion, due to the coronavirus (COVID-19) woes, GBP/USD marks mild losses of 0.7% to 1.2560 while heading into the London open on Friday. In doing so, the Cable nears the lowest level in five months as Brexit pessimism adds to the UK’s worries.

With the widespread outbreak of the deadly virus, the UK PM Johnson considered it the worst for a generation while citing fears of the actual numbers being higher than that. The pandemic led to the cancellation of the EU-UK Brexit trade deal talks that were to begin in London from the next week. However, both sides showed readiness to produce legal reports in the meantime.

Even so, the EU Chief Brexit negotiator Michel Barnier doesn’t forget to criticize the UK while saying “very serious divergences” had emerged in this week’s talks, as per the UK Express.

Chancellor Rishi Sunak is expected to step back from the previously announced tax hike as the UK Telegraph said, “the previous tax-raising plans were shelved in light of the coronavirus crisis, a source familiar with Treasury discussions told The Telegraph.”

Across the board, the coronavirus-led risk aversion continues with intermediate pullbacks. The latest one came after the BOJ infused 700 billion Japanese yen. While portraying the same, the US 10-year treasury yields bounce back to 0.82% with S&P 500 Future rising 1.0%. However, stocks in Asia remain under pressure.

Given the present momentum largely directed by the virus updates, traders might pay a little heed to the US data. However, BOE minutes could offer a strong near-term direction after the central bank marked a surprise cut during the week. “Minutes are released at noon GMT from MPC's "special" 10 March meeting where they decided to coordinate the inter-meeting easing package announced Wednesday. Key will be any openness to further easing (QE, in particular), and their assessment of growth through the first half of the year--we think a recession is now likely,” said TD Securities.

Technical Analysis

GBP/USD sellers can keep aiming for October 2019 high near 1.2415 unless crossing the 61.8% Fibonacci retracement level of its September-December 2019 upside, currently at 1.2560, a break of which could challenge 200-day SMA level of 1.2710.