GBP/USD: On the way to 1.42 despite Brexit woes

GBP/USD cheers US dollar weakness heading into Tuesday’s London open, up 0.18% intraday around 1.4180 by the press time. Alike all other major currency pairs, the cable also benefited from the downbeat US Treasury yields the previous day while also taking advantage of BOE policymakers’ optimism. In doing so, the currency pair ignores recent Brexit-negative headlines as the greenback remains pressured.

European Commission (EU) President Ursula von der Leyen remains firm on her Northern Ireland (NI) protocol commitment as all 27 members of the bloc agreed to keep the term intact after the latest EU summit, which ended on early Tuesday in Asia. “The beginnings are not easy, tensions are being felt around the access, for example, of EU fishing boats, or tensions are without any doubt there around the implementation of the protocol of Northern Ireland,” Mrs. EU’s von der Layen said as the Brexit talks are in pipeline.

The reason behind the market’s less attention to the Brexit worries could be traced from the upbeat mood of UK scientists as well as the Bank of England (BOE) policymakers. While the British doctors confirmed finding Indian strain of the covid and backed the unlock plans, BOE members including Governor Andrew Bailey hinted at tapering to justify their latest moves in Monday’s testimony.

Also positive for the GBP/USD bulls could be the preparations for the UK-India post-Brexit trade deal negotiations as well as the US dollar declines.

The US dollar index (DXY) stays pressured for the second consecutive day, down 0.07% near 89.76, as the Fedspeak flashes mixed signals over inflation and tapering. Following the comments rejecting reflation fears from Fed Governor Lael Brainard and St. Louis Fed President James Bullard, Kansas City Federal Reserve President Esther George mentioned, per Reuters, that she doesn’t dismiss the fears of an inflation surge.

Moving on, GBP/USD traders need to pay attention to the Brexit headlines and the US CB Consumer Confidence figures, not to forget second-tier US data, for fresh impulse. It should, however, be noted that a fourth negative daily performance by the US 10-year Treasury yields may keep fueling the cable prices.

Read: US Conference Board Consumer Confidence May Preview: Inflation saps consumer sentiment

Technical analysis

GBP/USD justifies Monday’s bounce off 10-day SMA, around 1.4130 by the press time. However, bulls need a clear break above 1.4200 to attack the yearly peak surrounding 1.4245.