GBP/USD pares losses below 1.3900 as Brexit, UK political jitters battle sluggish DXY

GBP/USD rebounds from eight-day low fades around 1.3870 ahead of Monday’s London open.

The cable followed the general market direction of respecting the US dollar strength while refreshing the multi-day low amid early Asian session. Also favoring the bears were Brexit and political headlines from the UK. However, the recent consolidation in the market sentiment tests US dollar bulls and offers a breathing space to the GBP/USD sellers.

The US Dollar Index (DXY) jumped to the fresh 18-day high as markets cheered Fed’s tapering concerns on Friday’s strong US jobs report. As per the latest release, the headline Nonfarm Payrolls (NFP) jumped 943K versus 938K prior (revised from 850K), also crossing the market expectations of 870K. Further, the Unemployment Rate declined to 5.4% from 5.9% in June.

Though, optimism concerning the US infrastructure spending passage, coupled with a bit easy covid figures from Australia and the UK, pauses the DXY bulls.

Even so, chatters political rift between UK PM Boris Johnson and Finance Minister Rishi Sunak, as well as Brexit concerns, keep GBP/USD sellers hopeful.

Early in Asia, The Times said, “Allies of Rishi Sunak warned Boris Johnson that he would “lose direction completely” if he sacked the chancellor as they hit back at reports that the prime minister had considered demoting him.”

On the other hand, The Guardian came out with the news quoting James Ramsbotham, CEO of North East England Chamber of Commerce, while saying, “Letter sent to Boris Johnson remains unanswered.”  Also describing the Brexit tussles is the latest push by ex-Brexit Party Leader Nigel Farage, quoted by the UK Express while saying, “He challenged Brussels and French President Emmanuel Macron to agree to a summit otherwise many lives will be lost and British communities will continue to suffer.”

Amid these plays, US stock futures remain mildly offered while the DXY trims early Asian gains around 92.80 by the press time.

Given the lack of major data/events, the latest Brexit and political headlines from the UK may entertain the GBP/USD traders, not to forget US stimulus updates and tapering tantrums.

Technical analysis

The 100-day SMA (DMA) crossover to the 50-DMA joins the bearish MACD signals to direct GBP/USD towards 200-DMA support, near 1.3760. Meanwhile, any recovery remains doubtful until staying below July’s top of 1.3983.