GBP/USD: Sluggish above 1.2900 as UK PM Johnson struggles to top the polls

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  • GBP/USD declines for the second consecutive day amid doubts over the Tory leader’s public favor after the ITV debate.
  • Broad USD strength offers additional weakness to the pair.
  • FOMC minutes, trade/political headlines in the spotlight.

Given the recent decline in the UK PM’s public favorite status, the GBP/USD pair extends weakness as it trades around 1.2915 while heading into the London open on Wednesday.

The ITV debate between the Tory and the opposition Labour leaders showed less of a drama as both showed a calm attitude while sticking to party agendas of Brexit and second referendum respectively. However, the poll at the end of the debate surprised the cable traders as the UK PM Johnson got only 51% votes in favor while the opposition leader Jeremy Corbyn got 49% marks. Until now, major polls kept showing nearly 14 points of a difference with the Tory leader in the front position.

Not only the recent polls at the end of the ITV’s head-to-head debate, doubts over the UK PM’s refrain from releasing the report of Russian meddling into the Brexit referendum and shelving the corporate tax cuts also portray challenges to the Tory leader.

The pair reversed from monthly high on Tuesday as upbeat housing market data from the United States (US) and the US Federal Reserve (Fed) policymakers John C. William’s sustained support for the current monetary policy pleased the greenback buyers.

The US dollar (USD) extended its gains on Wednesday amid fresh risk-off followed by the US-China tussle over the Hong Kong bill. The risk-tone also weighs down amid on-going protests in Hong Kong and Israel. With this, the US 10-year treasury yields drop to 1.75% while the AUD/JPY pair, also considered as a risk measure, fails to extend the previous day’s gains.

Moving on, minutes of the Federal Open Market Committee’s (FOMC) latest monetary policy meeting will decorate the economic calendar while trade/political headlines could keep traders busy. “The minutes of the FOMC’s 29-30 October meeting are due. The major change at the October meeting was the move to a more reactionary stance – the FOMC will now “assess the appropriate path” whereas previously would “act as appropriate”. Given Chair Powell sees the US economy in “a good place”, of key interest in the minutes will be the FOMC’s view on the risks to the outlook,” says Westpac.

Technical Analysis

While 21-day Simple Moving Average (SMA) near 1.2880 holds the key to pair’s downpour towards monthly low near 1.2770, 1.3000 and October high surrounding 1.3015 could keep challenging buyers.

 

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