GBP/USD pares weekly losses above 1.3800, UK employment data, PM Johnson eyed

• GBP/USD bounces off intraday low amid third downbeat day of the week.
• Brexit woes remain on the table, UK registers highest covid infections since January.
• DXY consolidates Powell-led losses amid virus woes, reflation fears.
• Powell testimony 2.0, US second-tier data and UK PM Johnson’s speech join the watcher’s list.

GBP/USD picks up bids from the day’s low to 1.3832, trimming intraday losses to 0.20%, ahead of Thursday’s London open. The cable seems to benefit from the pause in the US dollar rebound while also staying hopeful of an upbeat jobs report from the UK by the press time.

US dollar index (DXY) dropped the most in over a week the previous day after Fed Chairman Jerome Powell mentioned that a “lots of notice” would be given before adjusting the monetary policy in his bi-annual testimony. That said, the greenback gauge adds 0.07% gains to the day’s open despite the recent subdued performance around 92.45.

The coronavirus (COVID-19) woes in Britain and abroad, as well as the market’s fears of the Fed’s monetary policy adjustments, following the Bank of Canada (BOC) and the Reserve Bank of New Zealand (RBNZ), seem to have recently put a safe-haven bid under the US dollar. The strong prints of US Producer Price Index (PPI) ex Food & Energy for June, 5.6% versus 5.1%, add to the market’s reflation woes.

On the other hand, the UK’s Consumer Price Index (CPI) rose past 2.2% YoY expectations to 2.5% and pushed the BOE Deputy Governor Dave Ramsden to say, per Reuters, “The BoE might start to think about reversing its huge monetary stimulus sooner than he previously expected due to growing inflation pressures as Britain's economy bounces back from its COVID slump.”

It’s worth noting that the UK registered over 40,000 daily infections for the first time since January, per the latest readings from Reuters. Also negative for the GBP/USD prices could be the on-going Brexit jitters wherein UK’s Brexit Minister David Frost blames the Northern Ireland (NI) protocol, for the recent jump in Irish trade, while the British fishing industry experts’ warn of further EU-UK jitters, per the Financial Times (FT).

Amid these plays, stock futures remain mildly offered while the US 10-year Treasury yield remains pressured for the second consecutive day.

Looking forward, UK month Claimant Count Change for June, prior -92.6K and Unemployment Rate for three months to May, expected to remain unchanged at 4.7%, will be crucial for GBP/USD traders. Also important will be how UK PM Johnson “will vow on Thursday to "level up" the forgotten parts of Britain,” per Reuters, as well as Powell’s second-round of testimony and covid updates, not forget weekly US Jobless Claims and Philadelphia Fed Manufacturing Index figures. Amid all these plays, GBP/USD is likely to remain pressured as the latest BOE meeting rejected bulls and the UK’s covid conditions are comparatively bitter than the US.

Technical analysis

GBP/USD snapped a two-day downtrend the previous day but couldn’t cross the 100-day EMA hurdle of 1.3890. Even so, the upward sloping Momentum line joins the quote’s successful trading above the three-month-old support line near 1.3740 and 200-day EMA around 1.3690 favor buyers.