GBP/USD on a back foot as traders await fresh clues from Carney's speech

  • The Brexit pessimism weighs on the Cable amid sluggish risk tone.
  • Comments from BOE’s Carney and the US consumer-centric data will be on the spotlight.

With the latest political developments at the UK likely favoring a hard Brexit, investors await fresh clues from the BOE’s Carney for fresh impulse while the GBP/USD pair weakens to 1.2675 ahead of the UK open on Friday.

Boris Johnson leading the race of the UK PM with highest votes during the first round of Tory poll on Thursday and the British Parliament’s rejection to the Labour-led motion to block no-deal Brexit adds further strength to speculations concerning a hard Brexit.

However, some among the defeated runners, like Andrea Leadsom, might support other than Boris to help avoid Brexit risks.

On the other hand, sluggish data from the US and trade tussle with China highlights the risk of the Fed rate cut, which in turn weighs on market sentiment amid chances of a US-Iran war and drags the 10-year US yields further to the south at 2.084 by the press time.

While political plays will be here to direct the market momentum, comments from the Bank of England (BOE) Governor Mark Carney and monthly consumer-centric data from the US will be closely observed for fresh insights.

Given the nearness to the Bank of England (BOE) meeting and latest hawkish comments from some of the central bank’s policymakers, Governor Carney might not risk being dovish. Though, his tendency to repeat Brexit as a challenge to the bank’s future policy moves is less likely to be altered.

On the other hand, US retail sales for May and the Michigan consumer sentiment index for June will also be crucial. The headline retail sales growth could rally to +0.6% from -0.2% on MoM basis whereas retail sales control group might advance +0.4% versus 0.0% earlier. Further, the US consumer sentiment gauge is likely to be a tad lower to 98 from 100.

Technical Analysis

Bullish RSI divergence on the daily chart couldn’t lift the trading sentiment amid lower high formation, which in turn signals the pair’s drop to 1.2580 if 1.2640 fails to tame the bears.

Meanwhile, 1.2710, 1.2760 and 1.2865/75 area comprising April low and 50-day simple moving average (SMA) seem nearby key resistances to watch during the quote’s upside.

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