- GBP/USD grinds higher following the biggest daily jump in over a week.
- France detains UK ships, Britain summons French ambassador with readiness to retaliate.
- Softer US GDP, ECB announcements dragged down USD despite firmer Treasury yields.
- Risk catalysts can entertain ahead of Fed’s preferred inflation gauge’s release.
GBP/USD reacts to Brexit jitters with a cold heart, despite easing a bit from weekly top to 1.3800 by the press time of the initial Asian session on Friday. That being said, the cable pair seems to cheer the US dollar weakness amid risk-on mood.
“A British trawler has been seized by France and another has been fined, amid an escalating row over post-Brexit fishing rights,” said the BBC late Thursday to mark the fresh Brexit drama as the policymakers jostle over Article 16. Following that, an update showed that the UK summoned the French ambassador over the issue while Sky News reported Britain’s readiness to clash with the European Union (EU) over fallout from the key Northern Ireland (NI) protocol.
Read: Brexit saga continues and risk for GBP amount as traders brace for major clash
Other than the Brexit drama, the recent jump in the UK’s coronavirus cases and the covid-led fatalities also challenge the GBP/USD buyers. Britain registered the highest covid numbers and death toll since March before the figures eased on Thursday to 39,842 and 165 respectively. Even so, the UK removes the last seven countries from its travel red list.
UK Chancellor Rishi Sunak’s multi-billion Pound worth of budget 2021 and hints to taper the bond issuance, which indirectly signal the Bank of England’s (BOE) hawkish move, seems to play a distant role in the GBP/USD upside.
More importantly, the heaviest daily fall in 12 days by the US Dollar Index (DXY) could be linked to the cable pair’s run-up. The greenback gauge dropped the most since October 13 the previous day after US Q3 GDP slipped below 2.7% forecast to 2.0%, much lower than 6.7% prior. The softer GDP growth pushes the Fed to slow down on its monetary policy normalization rush.
It should be observed that the European Central Bank’s (ECB) hint to start tapering the monthly bond purchases and the PEPP (that’s the pandemic emergency purchase program) will end next March propelled the Euro and weighed down the USD. The regional central bank left monetary policy unchanged, as expected, with refinancing rate at 0.0% and deposit rates at -0.5%.
Amid these plays, Wall Street managed to recover Wednesday’s losses on Thursday while the US 10-year Treasury yields rose 4.9 basis points (bps) to 1.578% by the end of Thursday’s North American session.
Looking forward, Brexit, tapering and inflation headlines remain hot to determine near-term GBP/USD moves and hence today’s US Core PCE Inflation data for October, Fed’s favorite price pressure indicator will be important to watch. The Core Personal Consumption Expenditures (PCE) - Price Index for September is likely to ease to 0.2% from 0.3% prior on the MoM basis.
Technical analysis
GBP/USD rebounds from 50-DMA, around 1.3710 by the press time, to portray the previous day’s upside moves, which in turn joins bullish MACD signals and firmer RSI to direct the quote towards 200-DMA hurdle surrounding 1.3855.
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
USD/JPY holds near 155.50 after Tokyo CPI inflation eases more than expected
USD/JPY is trading tightly just below the 156.00 handle, hugging multi-year highs as the Yen continues to deflate. The pair is trading into 30-plus year highs, and bullish momentum is targeting all-time record bids beyond 160.00, a price level the pair hasn’t reached since 1990.
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
Ethereum could remain inside key range as Consensys sues SEC over ETH security status
Ethereum appears to have returned to its consolidating move on Thursday, canceling rally expectations. This comes after Consensys filed a lawsuit against the US SEC and insider sources informing Reuters of the unlikelihood of a spot ETH ETF approval in May.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.