- GBP/USD fades the previous day’s upside momentum from 1.2402.
- Fresh challenges to Brexit negotiations, USD recovery trigger the recent pullback.
- UK Manufacturing PMI, US data and FOMC minutes will join risk catalysts to provide fresh impulse.
GBP/USD eases from 1.2402 to 1.2380 while heading into the London open on Wednesday. In doing so, the Cable defies Tuesday’s upside momentum amid recent news suggesting further challenges to the EU-UK Brexit talks. Other than the updates from Brussels, the coronavirus (COVID-19) news and UK Manufacturing PMI could offer intermediate clues ahead of the busy US session.
While UK PM Johnson’s efforts to combat the worst GDP in 41 years, recently via infrastructure spending, got applauds the previous day. Also supporting the upside moves was the US dollar’s weakness amid risk-on sentiment and the quarter-end adjustments of trading positions. However, the buyers couldn’t stay on board for long as the departure talks between Britain and the European Union (EU) aren’t offering any positive signs. On the contrary, updates suggest the old neighbors might again fail to deliver any trade deal when they bid adieu on December 31, 2020.
Earlier on Wednesday, the City AM came out with the news, quoting the EU Chief Brexit negotiator Michel Barnier, suggesting Britain has not completed necessary equivalence assessments by today’s deadline, marking a blow to the UK’s efforts to determine the City’s access to EU markets after Brexit. Further, the UK Express relies on a leaked document to state fears of a ban onto the British exports to the bloc Union if they don't have the correct clearance from tax authorities. Additionally, a Conservative Member of Parliament (MP) from the UK, Lia Nici, fired shots at the EU while handling the controversial fishing access as no deal will finish off fishing industries of some of the key regional economies, per the UK Express.
Other than the Brexit news, the pair also bears the burden of the US dollar recovery amid escalating tension between the US and China, as well the fears of the virus wave 2.0 based on worrisome figures from America. Furthermore, Financial Times’ news that UK PM Johnson warned by company chiefs of ‘hugely damaging’ no-deal scenario also negatively affected the quote.
Looking forward, a second reading of the UK Manufacturing PMI for June, estimated 50.1 initially, will join the Brexit updates to offer immediate direction to the pair. Though, major attention will be given to the risk catalysts and FOMC minutes for fresh impetus. It should also be noted that the US ADP Employment Change and ISM Manufacturing PMI will also be the key for pair traders to watch during the day.
Technical analysis
The pair’s U-turn from a three-week-old falling trend line highlights 61.8% Fibonacci retracement of May-June upside, at 1.2358 now, followed by Monday’s low near 1.2250. However, a clear break above 1.2410 resistance line could propel the quote to confront the 1.2445/50 area comprising 50% Fibonacci retracement and 21/50-day EMAs.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Extra gains in the pipeline above 0.6520
AUD/USD partially reversed Tuesday’s strong pullback and regained the 0.6500 barrier and beyond in response to the sharp post-FOMC pullback in the Greenback on Wednesday.
EUR/USD meets support around 1.0650
EUR/USD managed to surpass the key 1.0700 barrier in response to the intense retracement in the US Dollar in the wake of the Fed’s interest rate decision and Chair Powell’s press conference.
Gold surpasses $2,300 as Dollar tumbles
The precious metal maintains its constructive stance and trespasses the $2,300 region on Wednesday after the Federal Reserve left its FFTR intact, matching market expectations.
Bitcoin price reclaims $59K as Fed leaves rates unchanged
The market was at the edge of its seat on Wednesday to see whether the US Federal Reserve (Fed) would cut interest rates during the Federal Open Market Committee (FOMC) meeting.
The market welcomes the Fed's statement
The market has welcomed the Fed statement, and the S&P 500 is higher in its aftermath, the dollar is lower and Treasury yields are falling. There is still only one cut priced in by the Fed.