GBP/USD remains under pressure, Brexit and US data come to limelight

  • GBP/USD struggles around 1.3050 ahead of European open on Thursday.
  • The pair recently drifted lower on negative news for the Brexit and welcome FOMC minutes.
  • Additional progress on Brexit and monthly data from the US will direct near-term market movement.

The GBP/USD pair trades little changed to 1.3050 while heading towards European sessions on Thursday. The pair declined on Wednesday as resignations by the UK PM Theresa May’s party members and upbeat FOMC minutes weigh on the sentiments. For now, developments surrounding Brexit and upcoming monthly prints of the US durable goods orders and manufacturing indices will be closely observed for fresh impulse.

In spite of PM May’s ability to make sure that the EU Commission chief Jean-Claude Juncker doesn’t communicate anything negative for Brexit, the GBP/USD couldn’t extend its earlier gains to Wednesday. There seems many reasons for the same but resignations of three Tory members and FOMC minutes can take the first seat.

Three pro-EU lawmakers quit the PM May’s Conservative party on Wednesday as they were unhappy with the government’s “disastrous handling of Brexit”. This renewed concern that PM May will have to struggle big time at the parliament even if she manages to get a good Brexit deal from the EU.

On the other hand, minutes of the January 29-30 Federal Open Market Committee (FOMC) meeting revealed that some among the committee favored rate-hikes during 2019 and an end of balance sheet normalization while leaving the monetary policy unchanged at that meeting. With the minutes reigniting rate-hike concerns, the USD registered across the board gains.

Looking forward, Theresa May is on her last ditched efforts to please EU members over the Brexit proposal before she puts her progress report in front of parliament on February 26. Out of all the issues, an insurance policy to limit extensive checks on the Irish border becomes a big headache for the UK and the EU leaders off-late. It should also be noted that there are no big releases/events scheduled to release from the UK.

For the US, monthly releases of December month durable goods orders and February month Philadelphia Fed manufacturing survey, coupled with Markit composite purchasing managers’ index (PMI), could entertain the USD traders.

The durable goods orders may increase with +1.7% against December month figure of +0.7% whereas Markit composite PMI could strengthen to 55.1 from 54.4 registered in January. However, the Philadelphia Fed manufacturing survey is likely weakening to 14 from 17 earlier.

With the Brexit signaling negative signs for the GBP and market expects upbeat numbers from the US, the GBP/USD pair may witness further downside. Additionally, developments at the US-China trade talks during the Chinese Vice Premier’s two-day visit can also provide intermediate moves to the pair.

GBP/USD Technical Analysis

Failure to surpass 1.3110 seems to drag the GBP/USD pair to 200-day simple moving average (SMA) level of 1.3005, a break of which may take a rest of February 13 high near 1.2960 ahead of visiting the 1.2930 support.

Alternatively, an upside clearance of 1.3110 enables the pair to confront five-month-old descending resistance-line, at 1.3200.

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