- GBP/USD snaps three-day uptrend, on a slippery ground of late.
- MEPs are up for voting on the post-Brexit trade deal, Brussels warn UK over breaching NI protocol.
- US dollar prepares for Powell’s defensive play amid covid, vaccine and stimulus jitters.
- UK’s reaction to Brexit deal can offer intermediate moves before the Fed takes the charge.
GBP/USD stays depressed near the intraday low of 1.3874, down 0.24% on a day, as a rush to risk-safety put a bid under the US dollar while heading into Wednesday’s London open. Although the pre-Fed mood is a stronger catalyst weighing on the cable, Europe’s final voting on the Brexit trade deal with the UK also backs the bears amid recently worrisome relations among the ex-neighbors.
Brexit deal in limbo without NI protocol…
Although Members of the European Parliaments (MEPs) are ready to back the post-Brexit trade deal discussed with UK PM Boris Johnson, no solution over the Northern Ireland (NI) makes the deal an unimpressive affair. On Tuesday, the European Union (EU) and the UK agreed to extend talks over the NI protocol for upcoming weeks. Even so, Brussels has warned Britain that UK PM Johnson’s failures to comply with the post-Brexit obligations on Northern Ireland could result in punitive measures on the British goods.
It should, however, be noted that Ireland's foreign minister Simon Coveney is hopeful of an NI protocol solution while citing 20 out of 26 issues being easy to tackle.
Hence, today’s voting may offer immediate joy after the bloc accepts what’s already agreed in December 2020. Though, any negative surprise will exert additional downside pressure on the sterling.
Elsewhere, 25% of the British adults are fully vaccinated but No10 denies having surplus jabs for India. The UK also witnesses a higher unease over AstraZeneca use.
It should be noted that the Spanish welcome British travelers from June and the first blood-clotting-related death in Canada after using AstraZeneca, not to forget the US dollar’s run-up on hopes of further stimulus, are extra catalysts that recently weighed on GBP/USD.
Against this plays, stocks futures are mildly bid and the US 10-year Treasury yields catch a breather around 1.62% after rising the most in six weeks.
Looking forward, Brexit announcements will offer an intermediate move to the GBP/USD but Fed will be the key. Traders will closely observe how Chairman Jerome Powell drops down his defensive outlook for the easy money policies.
Technical analysis
A clear downside break of a two-week-old support line keeps GBP/USD sellers directed towards a one-week low near 1.3825.
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