GBP/USD retraces from 20-week top to sub-1.3000 area, US GDP eyed

GBP/USD eases to 1.2985, down 0.10% on a day, while heading into the London open on Thursday. The Cable surged to the highest since March 10 the previous day after the US dollar marked broad losses on the bearish Fed. However, the greenback’s latest pullback joins Brexit woes to trigger the pair’s profit-booking moves. Also weighing on the quote could be the market’s cautious sentiment ahead of the US second quarter (Q2) GDP figures.

Although France refrains to give up its push for the same fishing rights in the British waters as it has, senior Tory leaders keep pushing the UK’s Brexit negotiator David Frost to not respect any kind of pressure, as per the UK Express. The news also highlights the bloc’s criticism of the British pattern of discussion as it quotes EU negotiator Phil Hogan while saying “We had been waiting for the last three months for the UK to come to the table in terms of meaningful negotiations. And I say it’s only in the last week or two that we have noticed that people are starting to engage on the UK side. We welcome that very much. The EU now wanting to know the UK's state aid plans before they could move to the next stage.” Elsewhere, Brussels ease Brexit norms for Northern Ireland, as per the BBC, as it stopped pushing for the Belfast office.

Other than the Brexit woes, the coronavirus (COVID-19) is also challenging the UK, even if not so much as the US. The country is has been on its run to take major steps in taming the pandemic. In its latest efforts, as per The Guardian, the government is expanding its Covid-19 rescue loan scheme to cover small businesses on the edge of collapse, a move that Labour warned would come too late for many troubled firms. In a separate move, “the isolation period for anyone with symptoms of possible COVID-19 in the UK will be increased to 10 days from the current seven” as per Reuters’ report quoting The Telegraph newspaper.

Moving on, the UK’s car productions slump 42% YoY, the biggest drop since 1954 during the six months to June, as per the Society of Motor Manufacturers and Traders (SMMT) figures released by the BBC. Additionally, Beijing escalated its fight with London while saying that Hong Kong’s government would suspend agreements on mutual assistance for criminal matters, including extradition, with Britain, Canada and Australia.

On the other hand, the US dollar index (DXY) bounces off June 2018 lows to 93.38, up 0.12% on a day, while retracing the Fed-led losses. The US Federal Reserve (Fed) marked economic pessimism and showed readiness to announce more easing, also emphasizing on the fiscal package, during the latest meeting on Wednesday. Also supporting the greenback could be the news suggesting that the deadlock over the phase 4 COVID-19 package is easing off-late.

Looking forward, a lack of major data/events from the UK continues to highlight the American calendar for fresh impetus. There is, preliminary readings of the US Q2 GDP, expected -34.1% versus -5.0%, which becomes the key.

Technical analysis

Failures to hold a break of 1.3000 psychological magnet drag the quote towards Tuesday’s high around 1.2940 ahead of highlighting an ascending support line from July 23, at 1.2925. On the contrary, an upside clearance of 1.3000 will have to cross February 13 top near 1.3070 before attacking March month’s peak of 1.3200.