- GBP/USD prints a two-day losing streak after reversing from 1.2297.
- BOE’s Bailey took a U-turn to praise negative rates, the UK to conduct hydroxychloroquine tests.
- Trade sentiment witnesses fresh downside pressure amid US-China tension, virus woes.
- UK/US PMIs, US Jobless Claims will offer a busy day ahead.
GBP/USD drops to 1.2196, marking a loss of 0.36% on a day, while heading into the London open on Thursday. The BOE Governor Andrew Bailey’s favor for negative rates followed downbeat UK inflation figures to pull the Cable back from a weekly high of 1.2297 the previous day. Though the pair’s latest fall seems to have more to do with the US dollar strength and risk aversion. Additionally, traders’ cautious mood ahead of the key activity data from the UK and US, as well as US Jobless Claims, adds to the quote’s declines.
Greenback regains the charm…
Be it the US-China tussle or the fresh fears over the coronavirus (COVID-19) wave 2.0, traders rushed to the US dollar amid the latest risk aversion move. In doing so, the US dollar index (DXY), the gauge of the greenback versus the major currencies, bounces off 14-day low while adding 0.18% gains to 99.36 by the press time.
It should also be noted that the Fed policymakers and FOMC minutes’ sustained rejection of negative rates might as well have triggered the US currencies’ pullback.
Cable bears cheer downbeat statistics, Bailey’s dovish stint amid virus woes…
Not only softer than expected prints of the headline Consumer Price Index (CPI) data from the UK but BOE Governor Andrew Bailey’s favor for the negative rates also weighed on the Cable off-late.
Additionally, virus woes are also playing their part to weigh on the pair. Amid further flattening of the curve, British PM Boris Johnson announced that the UK will have a “world-beating” contact-tracing system from June 01. However, ex-diplomat Jeremy Hunt doubts the date amid delay in testing results. It’s worth mentioning that Britain will test the virus drug over more than 40,000 healthcare workers from Europe, Africa, Asia and South America on Thursday, per the BBC. Elsewhere, UK Cabinet Office Minister Michael Gove Gove confirms plans for checks on goods crossing the Irish Sea, as per The Guardian, which in turn strains the Brexit talks with the EU.
Moving on, Traders will keep eyes on the preliminary readings of the UK Manufacturing and Services PMIs for May for immediate direction. While forecasts suggest recoveries from the previously disappointing figures, TD Securities said, “While we believe that we’ve seen the worst for the PMIs after the April prints, we think that the May prints are likely to remain closer to the lows than to the 50-mark. For manufacturing, we expect a small lift to around 35 (market 37.2), and for services improvement to 22 (market 24.0). These are still, of course, horrifically low levels.”
Following the UK activity figures, Preliminary readings of the US PMIs for May and weekly Jobless Claims will be watched for further direction. It should, however, be noted that the trade/virus updates will not lose their importance in the meantime.
Technical analysis
Sustained trading below 50-day SMA level of 1.2275 drags the GBP/USD pair towards monthly low near 1.2075 and 1.2000 psychological magnet.
Share
