- GBP/USD snaps two-day losing streak, bounces off one-week low.
- US dollar pullback plays its role amid a quiet session.
- Pubs and restaurants in England will be shut after 10:00 PM.
- BOE’s Bailey, UK PM Johnson’s COBR meeting and Fedspeak in the spotlight.
GBP/USD bounces off 1.2798 to currently around 1.2820 while heading into the London open on Tuesday. Unlike other major currency pairs that mostly portrayed US dollar gains, the Cable marked the coronavirus (COVID-19) woes at home to please the sellers the previous day. As a result, today’s announcements from the UK PM Boris Johnson’s emergency meeting will be the key. However, comments from the BOE Governor Andrew Bailey can offer immediate direction.
With the virus-led deaths reaching to April/May levels, authorities in the UK and Europe are pushed to announce restrictions over activities. While local lockdowns have been in fashion off-late, the latest announcement of time-limit to stay in the English pubs and restaurants has been the most severe recently.
Despite the latest moves from the UK policymakers, the GBP/USD recovers as the first version of the Fed Chair Jerome Powell struck economic pessimism. Also likely to activate the US dollar pullback could be the recent Sino-American tussle over the South China Sea after Trump administration member Mike Pompeo cheered support from the UK, France and Germany to reject Beijing’s claim over the disputed area.
Against this backdrop, S&P 500 Futures decline 0.10% while the losses in Asia-Pacific, except Japan, are magnified as US-China tension joins the COVID-19 burden on the risk sentiment.
Looking forward, BOE’s Bailey is to speak at a webinar hosted by the British Chamber of Commerce at 07:30 GMT. Ahead of the event, TD Securities said, “We still believe that markets over-interpreted the BoE’s comments on negative rates in last week’s MPC minutes, and look for confirmation from Governor Bailey that this is merely another step in the theoretical exercise of examining whether negative rates should be added to the BoE’s toolkit.”
Further, UK PM Johnson will chair today’s Cabinet Office Briefing Rooms (COBR), emergency response meeting, which in turn becomes the key event after BOE’s Andrew Bailey goes off. Although the recent restrictions on the pubs and restaurants have already limited the scope of any action from the Tory battalion, any surprise moves can’t be ruled out considering the severity of the virus woes in the nation.
Following that, the second version of the Fed Chair Jerome Powell’s testimony will be important to watch. Although the Fed boss has already shown his cards in the first remarks, any surprise optimism may help the US dollar to extend the latest run-up.
Technical analysis
Unless breaking a descending trend line from September 01, currently around 1.2930, buyers are less likely to take entries. As a result, a horizontal area comprising July 21 top and the monthly low, between 1.2762 and 1.2767, is actually in the spotlight.
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