- GBP/USD trims the early-day losses, still in the red amid broad US dollar strength.
- Fears of virus wave 2.0 keeps the risk-tone heavy, WHO’s Kluge warns over UK’s economic reopening.
- Cautious sentiment ahead of the UK PM’s virtual talks with the European leaders makes the case even more interesting.
- Brexit, virus updates and the US Empire State Manufacturing Index will be in the focus.
Despite gradually recovering from the intraday low of 1.2487, the GBP/USD pair prints losses worth 0.16% while taking rounds to 1.2520 during the early Monday. Although fears of the coronavirus (COVID-19) resurgence keep the US dollar on the front foot against all majors, the Cable seems to recover ahead of the further easing of lockdowns in Britain. Even so, the UK PM Boris Johnson’s Brexit meeting with the European policymakers become the key for the pair traders to watch.
Be it rising COVID-19 cases in the US and Tokyo or the recall of the partial shutdowns in Beijing, fears of the pandemic’s return hunt the global market’s risk-tone sentiment during the early-Asia. Also contributing to the risk aversion wave could be the protests in the US that widens the gap between US President Donald Trump and some of the State Governor, like New York’s Andrew Cuomo.
On the other hand, the World Health Organization’s (WHO) Regional European Director Hans Kluge criticized the UK’s pace of reopening. However, British leader Johnson seems to ignore it as the initial rule of a two-meter distance is also likely to be ignored during the latest wave of the economic restart.
It should also be noted that The Times came out with expectations that the Bank of England (BOE) will unleash further £150 billion of stimulus in its latest attempt to cushion the economic damage from COVID-19. The reasons favoring the case could be traced from the recently released downbeat UK data, including the unemployment rate and GDP. However, the BOE’s Governor Andrew Bailey sounded optimistic during Friday’s appearance.
Amid all these plays, the market’s risk-tone remains sluggish and weighs down on the US treasury yields as well as Asian stocks, which in turn helps the US dollar due to its safe-haven appeal.
Looking forward, the US Empire Statement Manufacturing Index, expected -30.0 versus prior -48.5, becomes the only key data to the left to decorate the calendar. However, major attention will be paid to the UK PM Johnson’s talk with the President of the European Council, Ursula von der Leyen, the President of the European Commission, and David Sassoli, the President of the European Parliament.
Today’s Brexit negotiations are likely to be the key as it will either make or break the case for the future of the UK’s departure from the EU. The reason is that the talks will give hopes of any trade deal, if being positive, and may support a soft Brexit. However, the early signals from The Telegraph suggest that the Tory leader will insist on a Brexit deal by autumn.
Technical analysis
Considering the Cable pair’s sustained trading below 100-day SMA, currently around 1.2535, sellers are targeting an ascending trend line from May 20, at 1.2413 now.
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