- GBP/USD stays on the front foot as bulls attack the highest levels since late April 2018, marked earlier in Asia.
- Reflation fears keep weighing the US dollar, GBP ignores EU-UK tension over the Brexit treaty.
- Britain tightens travel restrictions as infections fall, covid-led deaths rise.
- BOE’s Bailey, Fed’s Powell awaited to confirm the need for central bank actions, US CPI is important as well.
GBP/USD bulls flirt with the fresh 34-month top marked earlier in Asia, currently up 0.06% around 1.3825, while heading into the London open on Wednesday. Although broad US dollar weakness propels the cable’s upside momentum, the bulls have recently turned cautious as central bankers from the UK and the US are up for speaking later in the day.
The US dollar index (DXY) gauge stretches Friday’s U-turn from a two-month top to test the lowest since January 29. While recently increasing hopes of US President Joe Biden’s $1.9 trillion stimulus can be considered as a major reason for the greenback’s weakness, fears of reflation and likely measures from the Fed recently weighed on the US currency.
On the other hand, the European Union (EU) and the UK keep blaming each other for the worsening conditions in Northern Ireland. On Tuesday, Britain’s former Brexit negotiator David Frost said, per Reuters, that Britain’s relations with the European Union have been problematic since it left the bloc’s orbit with disagreements over vaccines and a threat to bypass safeguards in Northern Ireland. The UK’s Cabinet Minister Michael Gove also crossed views, via Reuters, while saying, “Britain wants to see practical changes on the ground to the implementation of the Northern Ireland protocol, which came into force at the start of the year and relates to post-Brexit trade.”
Also portraying the jitters were rumors that the EU is likely to seek a two-month extension in signing the Brexit treaty ahead of Thursday’s London visit of European commission vice-president Maroš Šefčovič to tackle the Northern Ireland issue.
Elsewhere, the British government eyes travel restrictions with hotel quarantine and prison threat the coronavirus-led (COVID-19) deaths within 28 days of virus-positive results jumped from 333 on Monday to 1,052 on Tuesday. The move ignores a reduction in the cases from 14,104 to 12,364 that refreshed the lowest figures since December 08.
Amid these plays, US stock futures keep refreshing the record top towards 4,000 whereas the US 10-year Treasury yields also stay positive above 1.0%. Further, British equity futures follow the suit while Asian shares trade mixed by press time.
Looking forward, GBP/USD traders will try to confirm two things for the two central bankers, respectively from the US and the UK. While BOE’s Andrew Bailey will be watched to defy negative rates, Fed’s Powell needs to defy the reflation woes to avoid a pullback in the cable prices. It should be noted that the like weakness in the US inflation data for January will also be observed closely.
Read: US Consumer Price Index January Preview: Can consumer demand spur prices?
Technical analysis
Given the bullish MACD signals and an upward sloping trend channel established since September 25, 2020, GBP/USD bulls are likely to keep the reins for some more time, for now. However, a confluence of the stated channel’s resistance line and low of early April 2018, around 1.3965-70, becomes a tough nut to crack for the buyers ahead of visiting the 1.4000 threshold.
Share
