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  • GBP/USD stays depressed near two-week low, extends Monday’s pullback.
  • EU rebuffs over the UK’s call for Brexit relaxation on NI border until 2023.
  • Covid vaccine optimism joins US stimulus hope to battle fears of retail rush 2.0.
  • BOE is expected to leave monetary policy unchanged, hints on negative rates will be the key.

GBP/USD stands on a slippery ground near 1.3600 while heading into Thursday’s London open. The quote drops for the fifth consecutive day as traders brace for the Bank of England’s (BOE) quarterly stint near the lowest since January 19. Also weighing on the quote could be the US dollar’s latest run-up based on cautious sentiment ahead of the key data/events left for publishing during the week.

The US dollar index (DXY) stays positive near a two-month high, flashed the previous day, as pre-BOE and NFP caution joins fears of fresh market frenzy. The reason could be traced from Robinhood’s latest easing of trading terms for the embattled stocks as well as US Treasury Secretary Janet Yellen’s key meeting with heads of the Securities and Exchange Commission, Federal Reserve Board, Federal Reserve Bank of New York, and Commodity Futures Trading Commission to discuss recent volatility in financial markets.

On the other hand, the European Union’s (EU) indirect rejection of the UK’s demand to extend the easy border checks between Northern Ireland (NI) and Britain until 2023 also weighs on the GBP/USD prices. Following the UK’s Cabinet Minister Michael Gove’s push for such a move, British PM Boris Johnson also highlighted the need for urgent action from the EU. While conveying the same, UK PM Johnson’s spokesperson said, “The Prime Minister said that we needed urgent action from the EU to resolve outstanding problems with Protocol implementation, to preserve the gains of the Belfast Good Friday Agreement and to ensure that Northern Ireland benefits in full from the UK’s exit from the EU.”

Further, chatters that the EU fears doing business with the UK, due to the coronavirus (COVID-19), as well as British firms’ downbeat performance due to Brexit exert additional downside pressure on the GBP/USD prices.

On the positive side, the UK reaches a 10 million milestone for vaccinations and is in the top-tier of the global jab race. However, the fears of the South African variant probe the bulls.

Amid these plays, stock futures in the UK and the US snap a three-day winning streak while the US 10-year Treasury yields also retrace the steepest jump in five years.

Looking forward, the BOE’s rate decision and the Quantitative Easing (QE) may have a little importance for the markets but the Quarterly Inflation Report (QIR) and speech from Governor Bailey shouldn’t be missed.

Read: Bank of England Preview: Bailey set to abandon negative rates, injecting sterling with new energy

Other than the BOE-led drama, GBP/USD traders should also pay attention to the headlines relating to market restrictions and US stimulus ahead of Friday’s NFP.

Technical analysis

While defying the higher low formation and Tuesday’s Doji, GBP/USD is likely to extend the south-run, taking clues from the confirmation of the short-term rising wedge, portrayed earlier. That said, 50-day SMA near 1.3540 seems to challenge short-term GBP/USD sellers ahead of the yearly bottom surrounding 1.3450. Alternatively, the 1.3700 threshold guards the quote’s short-term upside but the upper line of the stated wedge formation, near 1.3785, will be a tough nut to crack for bulls.