- GBP/USD remains depressed, recently bouncing off intraday low.
- Mixed clues for vaccines battle fears of a fresh covid strains.
- UK’s Frost take Brexit reins from Michael Gove, more drama ahead.
- US dollar eases from one-week top as risks dwindle, yields step back.
GBP/USD takes a U-turn from 1.3847, intraday low, while trimming the early-Asian losses to 0.08%, currently around 1.3855, ahead of the London open on Thursday. Even so, the quote drops for the second consecutive day even as the US dollar stops its upward trajectory around an eight-day high.
While China’s return couldn’t entertain markets, fears of more Brexit noise and the coronavirus (COVID-19) strains seem to have weighed on cable. In doing so, the quote also justifies recent consolidation in risk tone as portrayed by the US Treasury yields and stock futures.
UK PM Boris Johnson put his most trusted man David Frost on the Brexit driver-seat while ejecting Michael Gove as the designated Cabinet Minister. This means the Brexit hardliner will not hesitate to convince the European Union (EU) over more relaxations in Northern Ireland, which gained more attention off-late. The action could be traced from The Independent’s news quoted Conservative Group saying that the talks to rebuild security cooperation with the EU must restart now after the Brexit deal left the UK “less safe and less secure”. It’s worth mentioning that the All-Party Parliamentary Group (APPG) on financial services suggested more competitiveness for London if it is to succeed after the Brexit, which in turn should have backed the choice for Lord Frost.
Elsewhere, a new virus traced from Nigeria and the other one having an initial name as B1525 seems to challenge the UK’s strong vaccinations. The reason is the strains’ resistance to vaccines.
It’s worth mentioning that China’s resumption of trading after one-week off, due to the Lunar New Year holidays, couldn’t entertain traders as the dragon is yet to respond to the US-UK dislike for Beijing’s policies. Further, US President Joe Biden’s push for covid relief package and the recently upbeat data from the US and the UK seems to have paved the way for the market’s easy performance off-late.
That said, GBP/USD traders will keep their eyes on the US Treasury yields and the US dollar moves amid a lack of major data/events from the UK. Should the bond yield stay pressured, the greenback’s upside momentum can fade, which in turn could recall the sterling bulls.
Technical analysis
A downside break of two-week-old support line, now resistance, drags GBP/USD towards a convergence of January tops and 21-day SMA near 1.3755-60. Meanwhile, the high of Tuesday’s Doji candlestick, at 1.3951, becomes the key resistance to watch during the quote’s fresh recovery.
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