GBP/USD tackles 1.39, Scottish election, BOE to offer ‘Super Thursday’

GBP/USD stays pressured around 1.3900, fading bounce off intraday low near 1.3885, while heading into the London open on the key Thursday. Although China’s return renews US dollar strength, elections in the UK, including Scotland, as well as the Bank of England’s (BOE) Quarterly Inflation Report (QIR) keep cable traders cautious ahead of a crucial day.

The US dollar gains some bid amid Asia as Beijing responds to the global leader ire over its political and trade behavior at the Group of Seven (G7) Ministerial Meeting. The dragon nation also suspended China-Australia's strategic economic dialogue mechanism and dragged on market sentiment recently.

At home, the UK-France tension over fishing rights zoom and pushes British Prime Minister Boris Johnson to dispatch “two Royal Navy patrol boats to protect Jersey from a feared blockade by French fishing vessels,” per The Guardian. Not only the fishing rights but the Northern Protocol (NI) and red tape also contribute to the Brexit woes. As per the latest study by the London School of Economics and Political Science (LSE), “Three in five UK firms claim Brexit has disrupted their business with border delays, bureaucracy and costs affecting trade.”

Meanwhile, UK PM Johnson said that most people don’t want the Scottish referendum. His statement shows the confidence that Scottish leader Nicola Sturgeon may struggle to firm majority in the Parliament. “Sturgeon, who leads the pro-independence Scottish National Party, or SNP, has vowed to demand legal powers for another referendum by the end of 2023 if her party wins a majority in the 129-seat devolved parliament in Edinburgh,” said Reuters.

In addition to Scotland, people from England, including London, as well as Wales will also vote for local councils and devolved legislatures. While the final results may arrive during the weekend, the latest polls signal British people losing confidence in the government due to the pandemic and Brexit while also backing SNP for a fourth term.

Elsewhere, the Bank of England is up for praising the economic recovery from the coronavirus (COVID-19), which in turn could brighten QIR forecasts. However, the tone of Governor Andrew Bailey will be watched closely for immediate direction.

Ahead of the event, FXStreet’s Yohay Elam said, “While the BOE is set to paint a rosier picture of the British economy, the pound is poorly positioned and may fall in the aftermath.”

Read: Bank of England Preview: Three reasons why Super Thursday could become a sterling suffer-fest

Technical analysis

GBP/USD struggles for a clear direction between the confluence of 21-day and 50-day SMA, as well as a downward slopping trend line from April 20, respectively around 1.3855 and 1.3955. It should, however, be noted that the cable’s sustained trading beyond an 11-month-old support line near 1.3750 keeps buyers hopeful.