GBP/USD Price Weighed Down by Brexit, Politics, Eying FOMC

• As it consolidates its biggest daily loss in three weeks, GBP/USD struggles to gain momentum.
• Following Prime Minister Johnson’s defense of former Tory leader Chris Pincher, three key British diplomats have resigned.
• During Brexit, the five-point plan of the EU Labor Party was not approved.
• Before FOMC minutes and ISM US Services PMI, recession fears could put downward pressure.

The GBP/USD price fell and broke its biggest daily decline in almost a month around the lowest levels since March 2020. It remains on the sidelines after shedding off the earlier gains on Wednesday morning in Europe.

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Price action may have been affected by market consolidation ahead of important data/events and UK Prime Minister Boris Johnson’s refusal to resign and form a new cabinet. Labor’s five-point EU plan failed to please British voters, which could also be a plus for the pair.

Former inmates Rishi Sunak and Sajid Javid resigned, Nadhim Zahavi became British Chancellor, and Steve Barclay became Health Secretary. Also withdrawing from British politics was the deputy leader of the Conservative Party, Bim Afolami. A new round of political drama has erupted at Downing Street as British Prime Minister Johnson maintains former Tory member Chris Pincher despite allegations of sexual harassment.

In an article published in UK Express, Brexit supporters criticized Sir Keir Starmer’s five-point plan to keep the UK out of the EU, just days after he announced that the UK would not leave the Brussels Single Market and Customs Union.

The possibility of new China lockdown restrictions also contributes to global supply chain pessimism amid escalating Russian-Ukrainian clashes. German and Italian economic warnings intensified pessimism, while the Bank of England released a report indicating gloomy economic prospects.

Bullish US data and hawkish bets on major central banks fuel risk aversion and pressure GBP/USD rates. In May, US manufacturing orders rose 1.6% m/m, versus 0.5% expected, and were revised up 0.7% from previous readings.

GBP/USD key events to watch

The final UK PMI data for June from S&P Global Construction may suggest an immediate direction, but the UK politics and FOMC minutes will determine the future direction. The ISM’s June Services Business Activity Index is also expected to come in at 54.5 versus 55.9 previously.

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GBP/USD price technical analysis: Bears aiming at 1.1900 breakout

The GBP/USD price gained more than 70 pips from the previous day’s lows. However, the gains were too shallow to sustain. The pair is again aiming at a breakout of 1.1900 area. On breaking, the bears will look for 1.1800 as the next target. On the upside, 1.1975 and 1.2000 will remain stiff hurdles.

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