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GBP/USD: UK politics, economics tease bears around 1.2100, Fed Minutes, US NFP eyed

  • GBP/USD licks its wounds around two-week low, picks up bids of late.
  • Another attempt to oust UK PNM Johnson, pessimism among British companies keeps bears hopeful.
  • US holiday, bond market buying challenge further downside amid the inactive session.
  • UK updates, recession fears to underpin bearish bias ahead of FOMC Minutes, US employment report.

GBP/USD seesaws around 1.2100 as traders struggle for clear directions amid downbeat UK catalysts and the US dollar pullback. That said, the Cable bears take a breather around the two-week low during early Monday morning in Europe.

The US Dollar Index (DXY) remains pressured around 105.00 after refreshing a two-week top the previous day. The DXY’s latest consolidation could be linked to the US Independence Day holiday and the market’s preparations for the week’s key data/events, including the week’s Federal Open Market Committee (FOMC) Minutes and the US Jobs report for June.

Alternatively, chatters surrounding another attempt by the UK policymakers to oust Prime Minister (PM) Boris Johnson weigh on the GBP/USD prices. “Opponents of the Prime Minister will try to overhaul 1922 Committee rules so that another leadership challenge can be triggered immediately,” said the UK Telegraph.

Elsewhere, the latest survey from the British Chambers of Commerce (BCC) mentioned that 54% of more than 5,700 companies it surveyed between May 16 and June 9 expected turnover to increase over the next 12 months. This is down from 63% in the previous survey and the lowest share since late 2020, when many businesses were under some form of COVID restrictions, per Reuters. The news also stated, “British companies have turned increasingly glum about the outlook, with inflation surging and investment plans looking stagnant.”

It’s worth noting that the US dollar gauge refreshed its multi-day top the previous day after the US data propelled the recession woes. That said, the US ISM Manufacturing PMI for June slumped to the lowest levels in two years, to 53.0 versus 54.9 expected and 56.1 prior. The details suggested the Employment Index declined to 47.3 from 49.6 and New Orders Index fell to 49.2 from 55.1. Finally, Prices Paid Index dropped to 78.5 from 82.2, versus market forecasts of 81.0. It should be noted that the final readings of the S&P Global Manufacturing PMI for June dropped to the lowest level since July 2020, to 52.7 versus the flash estimate of 52.4 and 57 in May.

Additionally favoring the greenback is Russia’s claim of having complete control over Lysychansk and doubts over China’s ability to regain the economic transition, not to forget fresh covid woes from China’s Anhui province.

Against this backdrop, the US 10-year Treasury yields marked the biggest weekly fall since February whereas Wall Street benchmarks struggled for clear directions after Friday’s surprise gains. Further, S&P 500 Futures drop half a percent to portray the risk-off mood by the press time.

Looking forward, a lack of major data/events could restrict GBP/USD but the risk-off mood and negatives from the UK could keep the bears hopeful.

Technical analysis

GBP/USD is expected to stretch the gradual south-run within a seven-week-old falling wedge bullish chart pattern, between 1.1780 and 1.2235 at the latest. It’s worth noting that the bears are likely to have run out of steam and hence further downside appears less favorable.

Additional important levels

Overview
Today last price1.2106
Today Daily Change0.0007
Today Daily Change %0.06%
Today daily open1.2099
 
Trends
Daily SMA201.2277
Daily SMA501.2399
Daily SMA1001.2803
Daily SMA2001.3154
 
Levels
Previous Daily High1.218
Previous Daily Low1.1976
Previous Weekly High1.2332
Previous Weekly Low1.1976
Previous Monthly High1.2617
Previous Monthly Low1.1934
Daily Fibonacci 38.2%1.2054
Daily Fibonacci 61.8%1.2102
Daily Pivot Point S11.199
Daily Pivot Point S21.1881
Daily Pivot Point S31.1786
Daily Pivot Point R11.2194
Daily Pivot Point R21.2289
Daily Pivot Point R31.2398

Author

Anil Panchal

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.

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