GBP/USD: Mildly offered below 1.3900 as UK unlock optimism fades, US stimulus in focus
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GBP/USD: Mildly offered below 1.3900 as UK unlock optimism fades, US stimulus in focus

  • GBP/USD wavers in a choppy range following early Asian losses.
  • Risks dwindle before US covid aid package announcements, fear of virus resurgence due to Britain’s unlock also test the bulls.
  • EU prepares legal action over UK’s NI protocol, Brexit turns out as trade-negative while the ex-neighbors jostle over vaccine claims.
  • US stimulus, the British response to Brussels’ rejection of NI protocol will be the key.

GBP/USD holds lower ground around 1.3865, down 0.20% intraday, heavy inside a 10-pip range above 1.3860 off-late, while heading into Wednesday’s London open. In doing so, the cable portrays the market’s cautious mood ahead of the much-awaited US covid stimulus amid fears of witnessing a hike in the coronavirus (COVID-19) figures due to the latest unlock in the UK. Also weighing on the quote could be the EU-UK tussles and a light calendar.

Although the US policymakers are inching closer to the $1.9 trillion relief package, fear of any disappointment keeps traders at the bay. The mood also ignores comments from US Treasury Secretary Janet Yellen who favored, early in Asia, faster aid for local/state governments.

On the other hand, Britain’s top medical and scientific advisers  said on Tuesday, per Reuters, “Britain is not out of the woods’ on COVID-19 and it won’t be possible to eliminate coronavirus infections and deaths.” Also challenging the government’s plans could be comments from the British parliament’s Public Accounts Committee  that decried the “unimaginable” costs of England’s COVID-19 test and trace system.

Elsewhere, the UK and the European Union (EU) allege each other over the vaccine export restriction claims as well as Brexit and Northern Ireland (NI) protocol. While the EU is up for taking legal actions over the British unilateral extension of the Brexit’s NI protocol, the UK will do the “right thing” for the City of London on the EU’s refusal of access, said UK government offers, per Reuters.

Furthermore, the UK’s anticipated £5 billion a year losses n e-commerce, due to Brexit, joins the London-Beijing tussle to weigh on the pair.

Against this backdrop, the US 10-year Treasury yield seesaws around 1.53%, after declining the previous day, whereas stock futures in the UK and the US print mild losses by the press time.

Moving on, US stimulus becomes the key for the GBP/USD traders while the UK’s reaction to the EU’s anticipated legal action on the NI borders will also be important to follow. In both cases, the GBP/USD is expected to remain volatile and worth watching.

Technical analysis

Unless breaking a three-month-old ascending trend line, currently around 1.3825, GBP/USD bears are likely to remain cautious.


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