GBP/USD renews monthly bottom above 1.3600 on Brexit, covid woes ahead of UK Retail Sales
- GBP/USD remains pressured after the biggest daily fall since June.
- Brexit blamed for chicken shortage, departure of highly paid bankers.
- UK braces for booster shots of vaccine as current vaccines found to have less effective against Delta covid variant.
- Virus woes, central bank headlines can entertain bears, UK Retail Sales for July important.
Having dropped the most since June, GBP/USD remains on the back foot around 1.3630, battling the key technical support, during Friday’s Asian session. In doing so, the cable pair justifies the recently easy consumer confidence figures while also bearish the burden of the Brexit and coronavirus jitters.
The GfK Consumer Confidence for August matched the -8 forecast versus -7 prior. “British consumer morale cooled a little after touching its highest level since the start of the COVID-19 pandemic,” said Reuters after the release.
Elsewhere, Brexit is blamed for the chicken woes in the UK and the drain of bankers from Britain to the European Union (EU). The Financial Times (FT) said, “UK chicken producers say post-Brexit immigration restrictions are to blame for staff shortages that have forced them to reduce supply, causing restaurants including KFC and Nando’s to cut menu items and close branches.” On the other hand, Reuters said, “Nearly a hundred highly paid bankers left Britain ahead of its departure from the European Union, the bloc's banking watchdog said on Wednesday, the latest confirmation of how Brexit has reshaped Europe's financial sector and its tax base.”
Talking about the coronavirus woes, the UK reported 36,572 new cases and 113 covid-led deaths on Thursday. The British policymakers are concerned about the Delta covid variant break and push hard for booster shots, not to forget vaccines for 12-17 years old. Another reason for the same could be the British research showing that the current vaccines from Pfizer and AstraZeneca are less effective to tame the virus strain.
On a broader from Australia reported the record daily jump in infections while New Zealand’s virus cases sneak into Wellington of late. Furthermore, cases in China and the US ease a bit but remain at worrisome levels.
The virus jitters and Brexit fears put a safe-haven bid under the US dollar, fueling the US Dollar Index (DXY) near the yearly top. Also favoring the greenback is the tapering tantrum.
Hence, the GBP/USD prices may remain on the bearish trajectory unless any positive developments rollout from either the UK or the US that enriches market sentiment, which is less likely.
Looking forward, a lack of major data/events may offer a little impetus and keep the risk catalysts on the driver’s seat. However, UK Retail Sales for July, expected to ease from 9.7% to 6.0% YoY, will be important to watch.
Technical analysis
GBP/USD bears attack the yearly support line near 1.3630 but clear trading below 200-DMA, around 1.3795, keeps the sellers hopeful to refresh 2021 low under 1.3572.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
