GBP/USD pokes monthly high around 1.2100 despite UK political jitters, BOE concerns

GBP/USD grinds higher at the monthly top, printing the four-day uptrend as it rises to 1.2085 during Tuesday’s Asian session. It’s worth noting that the cable pair’s recent strength takes clues from the US dollar’s weakness while ignoring concerns over UK inflation and politics.

US Dollar Index (DXY) drops for the fourth consecutive day, down 0.22% intraday around 106.25 by the press time. In doing so, the greenback gauge takes clues from the downbeat US Treasury yields and recently softer US data.

It’s worth noting that the US 10-year Treasury yields, down 3.5 basis points near 2.78%, reversing the previous day’s rebound to 2.81%. Further, Monday’s Chicago Fed National Activity Index for June and Dallas Fed Manufacturing Index for July, preceded by Friday’s US S&P Global PMIs for July, also strengthened economic fears surrounding the US.

Recently, global rating giant Moody’s downgraded growth forecasts for Eurozone and the US but failed to lift the US dollar.

That said, Bloomberg came out with the findings from a research company Ipsos that said 45% of adults thought inflation is one of the most troubling issues confronting the nation, the highest level recorded since the survey started in the early 1980s. Elsewhere, Foreign secretary Liz Truss will promise on Tuesday to bring in "tough and decisive action" to limit strike action by trade unions if she becomes Britain's next prime minister, per Reuters.

On a different page, the indecision over the Bank of England’s (BOE) next move should have also weighed on the GBP/USD prices, but did not. The Bank of England (BoE) will likely shy away from a bigger interest rate rise in August and instead stick to the more modest 25 basis point increases it has been delivering. Still, according to the latest Reuters poll of economists, it is a very close call.

It should be observed that the S&P 500 Futures fail to cheer downbeat US Treasury yields and softer US data, not to forget the US dollar weakness.

Amid these plays, the GBP/USD prices are likely to remain firmer as the hawkish hopes from the BOE join softer yields ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting. Even so, S CB Consumer Confidence for July, prior 98.7, appears the key for traders to watch.

Technical analysis

A successful upside break of the 21-DMA, around 1.2000 by the press time, directs GBP/USD buyers towards a downward sloping resistance line from late April, around 1.2110 at the latest. It’s worth noting that an eight-day-old support line, close to 1.1970, adds to the downside filters for the pair.