GBP/USD struggles around 1.3800 amid Brexit, coroanvirus fears, focus on UK data dump
- 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.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
