GBP/USD upside stalls near 1.2280 amid banking crisis, BoE response, and Brexit uncertainty

GBP/USD dribbles around a six-week high, making rounds to 1.2270-80 during early Tuesday, as the banking crisis challenges the Bank of England (BoE) hawks. Also testing the Cable pair buyers are the looming fears of another Brexit disappointment, despite UK Prime Minister Rishi Sunak’s hard efforts to strike a deal over the Northern Ireland Protocol (NIP).

The Telegraph conveys multiple analysts’ estimations while saying, “The Bank of England (BoE) will be forced to abandon an interest rate rise this week following turmoil in global financial markets.” The forecasts become too important ahead of the “Super Thursday” as some on the floor expected a 50 bps rate hike from the “Old Lady”, as the BoE is casually known.

On the other hand, BBC News quotes Democratic Unionist Party (DUP) Leader Sir Jeffrey Donaldson as saying that the agreement was not sufficient to deal with concerns that his party had raised about post-Brexit trade rules for Northern Ireland. “The DUP has confirmed that it will oppose the deal - known as the Windsor Framework - when MPs are given a vote on part of it on Wednesday,” adds BBC News.

Elsewhere, hopes of easing the banking crisis seem to have favored the market sentiment and drowned the US Dollar. UBS’ takeover of the troubled Credit Suisse, by paying 3 billion Swiss francs (£2.6bn), eased the market’s baking fears. On the same line were statements from the US Federal Deposit Insurance Corporation (FDIC) mentioning that the deposits of Signature Bridge Bank will be assumed by a subsidiary of New York Community Bancorporation.

Additionally, news that five major banks, including the BoE, joined the US Federal Reserve (Fed) to ease the US Dollar liquidity crunch via currency swaps and added strength to the market’s risk-on mood.

It should be noted, however, that a Senior Swiss lawmaker warned on Monday that “the UBS-Credit Suisse merger is an enormous risk,” which in turn probed the optimists amid the market’s anxiety ahead of this week’s top-tier data/events.

Against this backdrop, the US Dollar Index (DXY) dropped to the lowest levels in a month while the US Treasury bond yields stays pressured. Further, Wall Street closed on the positive side where Gold price refreshed Year-To-Date (YTD) high before retreating to $1,980 at the latest.

Moving on, Cable traders should keep their eyes on the risk catalysts for fresh impulse ahead of Wednesday’s Federal Open Market Committee (FOMC) Monetary Policy Meeting and Thursday’s top-tier outcomes from the Bank of England.

Technical analysis

A successful upside break of the 1.2200 horizontal resistance, now support, enables GBP/USD bulls to keep the reins.