GBP/USD retraces gains under 1.2600, Brexit, UK Services PMI in focus

• GBP/USD surged to a five-week top before stepping back to 1.2566.
• UK coronavirus death toll reaches the grim milestone, PM Boris Johnson takes charge of the proceedings.
• Fisheries offered tough start to the Brexit talks, as expected, EU’s Barnier still proposes two-year extension to deadline.
• US dollar offered heavily amid risk-on sentiment, busy day for traders ahead.

GBP/USD consolidates the latest gains around the five-week top while taking the bids near 1.2585, up 0.27% on a day, ahead of the London open on Wednesday. In addition to mildly positive headlines from the UK, broad US dollar weakness favors the pair’s latest run-up. Even so, Cable traders wait for further developments of the ongoing Brexit talks, as well as UK Services PMI, for fresh impetus.

In addition to the anticipated break of Brexit deadlock, UK PM Boris Johnson’s rush to take control of the coronavirus (COVID-19) action also pleased the Cable buyers during early-Asia. While the European Union’s (EU) Chief Negotiator Michel Barnier’s push for Brexit extension reignited concerns of a soft Brexit, a surge in the UK’s virus-led death toll to 50,000, the highest in the world, on Tuesday pushed the UK PM to take charge of things.

It's worth mentioning that the EU used alternative ways to push the UK towards agreeing on the issues concerning the fisheries. The Guardian said, “the UK’s fishing industry has accused the EU of using a ‘nuclear option’ to secure a Brexit deal, warning that it is prepared for blockades by the French if trade talks collapse.”

Elsewhere, Nissan’s global chief operating head Ashwani Gupta told BBC that UK factory still under threat from no-deal Brexit whereas the British PM Johnson is now signing to uphold ties with Hong Kong. The Tory leader was also reported to be offering hope of refuge to 3 million Hong Kong people, as reported in the Times and South China Morning Post.

On the other hand, US President Donald Trump stepped back from the earlier fears of major military use to combat the protests against the alleged killing of Minnesota’s George Floyd.

As a result, the market’s risk-tone remains positive with the stocks in Asia and the US 10-year Treasury yields regaining their previous strength, which in turn pushes the US dollar index (DXY) down to fresh lows since early-March.

Traders are now waiting for the UK Services PMI for May, expected 28 versus 27.8 while also keeping eyes on the Brexit headlines. It should additionally be noted that the US calendar is a heavy one to follow during the later part of the day. In this regard, Westpac said, “In the US, Westpac anticipates that the ADP private payrolls survey will show a further 8,000,000 jobs were lost over May. Factory orders (market f/c -13.4%) and durable goods orders (final, market f/c -17.2%) should confirm that investment and related orders cratered in April. Finally, the May ISM non-manufacturing survey is expected to reveal a modest recovery to 44.4.”

Technical analysis

The pair bulls will wait for a clear break above 100-day SMA level of 1.2575 to probe April month high near 1.2650. However, a 200-day SMA level close to 1.2675 might question the bulls afterward. Meanwhile, bears are less likely to enter unless the quote slips below 61.8% Fibonacci retracement of its March month fall, around 1.2520.