- GBP/USD fails to extend corrective pullback from weekly low.
- Brexit bill adds to the EU-UK disagreements over departure issues.
- Restrictions ease for UK travellers returning to England even as higher infections probe July 19 deadline.
- Britain’s monthly economic releases for May can entertain traders but covid, Brexit become crucial to follow.
GBP/USD edges higher around 1.3790 as buyers step back amid the early Asian session on Friday. The European Union (EU) and the UK recently engaged in another tussle over the Brexit issue and additionally challenged the cable that bears the burden of the coronavirus (COVID-19) resurgence at home. Even so, traders are cautious ahead of the monthly data dump.
Even when the ex-neighbors are struggling to overcome differences on the Northern Ireland (NI) protocol and fishing issues among many departure issues, the Financial Times (FT) came out with the news suggesting another, the older one, bump in the Brexit negotiations. “Brussels and London were on Thursday locked in a dispute over the size of the UK’s Brexit bill, after the EU suggested that Britain would be obliged to pay €47.5bn (£40.8bn) as part of its post-Brexit arrangements,” said the news.
On the other hand, covid infections at home jump the highest since early January and raise challenges for UK PM Boris Johnson’s “Freedom Day” promise. As per Reuters, Britain reported on Thursday 32,551 new COVID-19 cases and 35 deaths within 28 days of a positive test, official government data showed. That compared to 32,548 cases and 33 deaths reported a day earlier.”
The virus woes aren’t only dominant in the UK as recent updates from the US also suggest that over half of the covid cases registered in two weeks are of Delta variant. Additionally, Australia, Indonesia, South Korea and Thailand are some other nations that recently jostle with the virus. The concerns become grim on chatters that the strains do resist the vaccines.
Amid these plays, Wall Street benchmarks posted losses and the US 10-year Treasury yields refreshed a five-month low. However, the US dollar index (DXY) couldn’t benefit from the risk aversion wave and neither do GBP/USD prices.
Moving on, the UK data dump for May, comprising monthly Industrial Production, Manufacturing Production, Trade Balance and GDP release, will be the key catalyst for GBP/USD as recovery hopes fade in the West. Forecasts suggest the downbeat performance of the British economy in May. However, the gradual unlock afterward may keep the pair buyers hopeful should the US dollar remains on the back foot. Above all, covid and Brexit headlines are the key.
Technical analysis
A clear downside below a five-month-old support line directs GBP/USD prices towards the 200-DMA level surrounding 1.3670. On the contrary, corrective pullback needs to overcome a descending resistance line from June 23, around 1.3865.
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 jumps above 0.6500 after hot Australian CPI data
AUD/USD extended gains and recaptured 0.6500 in Asian trading, following the release of hotter-than-expected Australian inflation data. The Australian CPI rose 1% in QoQ in Q1 against 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY hangs near 34-year high at 154.88 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.