- GBP/USD looks for direction after three days of fall.
- Virus woes, expectations of receding government aid pressure the Cable amid UK-US trade negotiations.
- UK Construction PMI can offer immediate direction, “Super Thursday” is in the spotlight.
GBP/USD narrows the trading range below 1.2500, presently down 0.05% on a day around 1.2430, while heading into the London open on Wednesday. Even if the UK’s coronavirus (COVID-19) woes keep exerting downside pressure on the Cable, the on-going trade talks with the US, ahead of the “Super Thursday”, limits the pair moves. Also likely to contribute towards the recent pause could be the upcoming final reading of April month UK Constriction PMI.
On Tuesday, Britain registered the highest death toll in Europe by crossing Italy’s 29,315 figures with 29,427. This exerts additional pressure on the Tory government that is already criticized heavily for the lack of medical supplies, falling below testing targets and a lack of clear guidelines for lockdown exit.
Also negative for the pair is the Brexit doldrums that recently ticked after policymakers from the UK and the US began two-week long virtual trade negotiations that could push the European Union (EU) towards east exit norms. Furthermore, Irish Foreign Minister Simon Coveney said, as per The Guardian, that Brexit talks are hurtling to another crisis point unless progress is made in the next two rounds of talks.
Additionally, the Times report suggesting the British policymakers are looking to scale down fiscal support also disappointed the pair traders. “The UK Chancellor Rishi Sunak is preparing to ‘wean’ businesses and workers off the government’s furloughing scheme by cutting wage subsidies,” said the news.
Even so, the traders are waiting for the key BOE, as well as today’s UK Construction PMI, amid the quiet Asian markets. The risk-tone remains mildly heavy following recently downbeat activity numbers from the leading global economies. As a result, the UK’s final reading of Construction PMI, expected 22 versus 39.3 prior, will be watched closely, together with the virus/trade updates, for directions ahead of tomorrow’s BOE.
Technical analysis
While 21-day SMA, currently near 1.2450, limits immediate upside, buyers are less likely to get impressed unless the pair crosses a 200-day SMA level of 1.2660. On the contrary, an ascending trend line from April 07, at 1.2335 now, seems to limit the pair’s near-term downside.
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