GBP/USD teases two-week top past 1.3800, ignores UK tax hike fears, Brexit and coronavirus woes

• GBP/USD remains on the front foot around the multi-day top, sidelined of late.
• UK PM Johnson pushes for a tax hike to pay for social care, confirms September booster jab plan.
• China alleged to plan to steal business from London, Brexit weighs on UK’s food supplies.
• USD weakness favors bulls ahead of the NFP, UK Services PMI eyed as well.

GBP/USD struggles between the US dollar weakness and the recently downbeat catalysts for the UK around a fortnight high close to 1.3830 during Friday’s Asian session. Alike other major pairs, the cable also cheered the greenback’s fall while refreshing the multi-day top the previous day despite covid and Brexit concerns. The latest challenge is relating to the tax hike proposal from UK Prime Minister Boris Johnson.

UK PM Johnson is up for publishing a tax hike to pay for an overhaul in social care. The likely rise in national insurance will see around 25 million people pay extra tax, per The Telegraph. It’s worth noting that the move was widely anticipated and hence the traders seemed to have chosen to remain on the sidelines before the key US Nonfarm Payrolls (NFP).

Previously, the US Dollar Index (DXY) dropped the most in a week, to the one-month low, as market players reject the Fed’s tapering concerns amid a run of downbeat early signals for today’s US jobs report.

On Thursday, the Initial Jobless Claims and Continuing Claims eased from the market consensus for the week ended on August 27. The four-week average of Initial Jobless Claims also declined from 366.75K to 355K. It should be noted that the Goods and Services Trade Balance eased in July whereas the Factory Orders came in better-than-expected for the said month.

It’s worth mentioning that UK PM Johnson also pushed for fastening vaccine jabs for 16–17 years old, as well as confirmed plans for COVID booster jabs in September, per the Sky News. On the same line, the UK covid numbers are on the spike of late with the death toll refreshing multiday high and infections rising past 38K.

Elsewhere, the UK Express came out with the Brexit headlines indicating China’s rush to grab the financial power of the City of London. “China has announced it will launch a new stock exchange in Beijing, in a fresh challenge to the financial dominance of the City of London,” said the news. Furthermore, Brexit and visa issues for lorry drivers cut down on the UK’s food exports while keeping the services rendered intact to the bloc.

Against this backdrop, Wall Street benchmarks came in as mildly positive and the US 10-year Treasury yields dropped 1.7 basis points (bps) by the end of Thursday’s North American session. Following that, the S&P 500 Futures print mild gains by the press time.

Moving on, the final reading of the UK’s Services PMI for August and risk catalysts may entertain the GBP/USD traders ahead of the key US jobs report.

Read: US August Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises

Technical analysis

GBP/USD needs to keep an upside break of a three-month-old resistance line, now support around 1.3830, to aim for late July tops near 1.3935. Failures to do so have another filter to the south, namely the 200-DMA level near 1.3810–15, before directing the quote to the weekly support line near 1.3760.