GBP/USD: UK Politics, Brexit probe bulls near 1.3600, US employment data eyed

GBP/USD struggles to cheer US dollar weakness around a two-week top near 1.3600 ahead of Friday’s London open. That said, the cable pair eases from an intraday high of 1.3615 but stays positive on a day for the sixth time by the press time.

Having witnessed a stellar show of the Bank of England’s (BOE) rate hike, GBP/USD bulls face challenges from the UK politics and Brexit concerns as markets prepare for the monthly US jobs report. Also challenging the cable pair buyers is the bumpy technical road to the north.

“Cabinet Ministers believe there is ‘50/50’ chance that Boris Johnson will be forced out of office after four of his most senior aides quit Downing Street and his Chancellor publicly rebuked him,” said the Times while conveying political hardships for UK PM Johnson during early Friday morning in Asia.

It’s worth noting that UK Chancellor Rishi Sunak was cited as rebuking PM Johnson due to his claims that Labour Party Leader Sir Keir Starmer was responsible for not prosecuting the pedophile Jimmy Savile.

Elsewhere, Northern Ireland’s halt to the checks on goods coming into the province’s ports as required under the Brexit agreement portray an escalation in the grave issue. On the same line were comments from Franziska Brantner, parliamentary state secretary in Germany's Economic Ministry, “Britain should respect post-Brexit trade rules or else face consequences,” said the German Diplomat per Reuters.

In the US, ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened the previous day. Following the data, Richmond Federal Reserve President Thomas Barkin said, “The US Federal Reserve needs to begin raising interest rates but it is too soon to say how far or fast that process will need to go to bring inflation under control.”

Against this backdrop, the US 10-year Treasury yields rose 1.8 basis points (bps) to 1.845%, bracing for the first weekly gain in three. Further, S&P 500 Futures rise 1.14% around 4,520 whereas stocks in the Asia-Pacific region are mixed of late.

Looking forward, GBP/USD traders will keep their eyes on the Brexit and political updates for intermediate clues ahead of the US employment data for January.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

GBP/USD justifies the clear upside break of the 50% Fibonacci retracement (Fibo.) of the July-December 2021 downside, as well as sustained trading beyond the 100-DMA. Also keeping the GBP/USD buyers hopeful is the firmer RSI line, not overbought, together with the MACD line that teases bulls.

That said, the quote is up for further advances towards a descending resistance line from July, close to 1.3635, as an immediate hurdle.

Alternatively, pullback moves will initially aim for the 50% Fibo. and 100-DMA, surrounding 1.3570 and 1.3510, before declining towards the latest swing low, also comprising the 23.6% Fibonacci retracement, around 1.3350.