- GBP/USD extends losses from the weekly high of 1.2687 while being in the red for third day in a row.
- Mostly downbeat UK economics increase odds of the BOE’s action to combat the virus fears.
- Expectations of the Brexit deal before autumn recede, Germany signals ‘hot phase’ in September.
- G7 urges China to reconsider pushing for Hong Kong security law.
GBP/USD is seen trimming the intraday losses while rising to 1.2555 ahead of the London open on Thursday. Even so, the pair posts three-day losing streak ahead of the key monetary policy meeting by the Bank of England (BOE).
The Cable’s latest gains could be attributed to the recovery in risk-sentiments, mainly due to the no halt in the US-China trade talks. Though, China’s clear ‘NO’ to the US, when it comes to Hong Kong and Xinjiang, seems to keep the risks elevated. As a result, the US 10-year Treasury yields stay on the back foot around 0.70% while stocks in Asia cut initial looses but remain negative as we write.
Other than the risk catalysts, the market’s cautious mood ahead of the BOE’s monetary policy meeting could also be cited as a reason for the pair’s weakness during the last three days. Be it mixed employment data or downbeat inflation, not to forget Brexit worries and economic fears of the coronavirus (COVID-19), the UK’s central bank is anticipated to act via an increase of stimulus. In doing so, the old lady is less likely to alter the benchmark interest rates but boost its bond-buying scheme.
Read: Bank of England Preview: Bailey may boost pound by going big on bond-buying, beware negative rates
The recent updates concerning Britain suggest that odds of any EU-UK trade deal by the end of July have been downsized by the European Union (EU) Brexit negotiator Michel Barnier. However, Germany is still keeping Boris Johnson led governments hopeful for a deal when it takes the bloc’s Presidency. Elsewhere, the UK’s second vaccine of the COVID-19, Dexamethasone, got upbeat results and showed praise on the Tory government.
It should also be noted that the spat between the UK and China is still unsolved, actually got bitter, after the Group of Seven (G7) leaders including Britain pushed Beijing towards reconsidering their rush to Hong Kong.
Although the BOE becomes the eye-candy for the GBP/USD pair traders for today, virus updates and the US-China news, not to forget any surprises from Beijing to the UK, could offer intermediate moves to the quote.
Technical analysis
The pair portrays a head-and-shoulders formation on the four-hour chart that needs validation from an ascending trend line from May 17, at 1.2460 now. Meanwhile, an upside clearance of the pair’s weekly top surrounding 1.2688 will pour cold water on the face of the said technical play.
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