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  • GBP/USD fails to hold onto recovery gains amid trade optimism, upbeat comments from Fed’s Powell.
  • The UK’s Tories remain on the top of the poll, though with lesser margin, while fights over manifestos continue.
  • US economic calendar, trade/political headlines will be the key drivers to watch amid a lack of British data/events.

With the trade headlines and comments from the Fed Chair Jerome Powell diverting market’s attention off from the UK’s political drama, GBP/USD trades around 1.2900 while heading into the London open on Tuesday.

Update that trade negotiators from the United States (US) and China discussed ways to resolve issues over the phone call increased odds of a phase one deal between the global superpowers. Traders mostly ignored looming uncertainty over the second round of talks, as conveyed by Reuters.

Also, the US Federal Reserve (Fed) Chairman Jerome Powell crossed wires while speaking at the Providence Chamber of Commerce Annual Meeting in Rhode Island. The Fed boss refrained from providing any fresh clues to the future monetary policy. However, his positive bias for household spending ruled out downbeat comments concerning global trade and job gains.

With this, the US dollar (USD) extend its previous run-up while the risk sentiment, as portrayed by the US 10-year treasury yields and major stock indices, stay modestly positive.

In the United Kingdom (UK), the ruling Conservatives and the opposition parties are at each other after the Tory leader, Boris Johnson, released the party’s manifesto during the weekend. While the Labour Party is busy finding mistakes in the Tory promises, ranging from National Healthcare System (NHS) to Defence, the Liberal Democrats (LibDems) doubts the Prime Minister (PM) Boris Johnson led to party’s ability to offer smooth Brexit before the Christmas.

Amid all these, Reuters came out with its latest polls on the UK election found that the Tories are now having a lesser margin, despite running first, as compared to the biggest opposition Labour Party. The news concerning the Labour Party’s readiness to put the leader Jeremy Corbyn behind, if at all they get the chance of form a minority government, could help increase the odds in favor of the Conservatives.

While there seems no major data/events up for publishing from the UK, traders will look for the US catalysts in order to determine near-term trading bias. In doing so, the second-tier housing and manufacturing data will join Consumer Confidence and a speech from the Fed Governor Lael Brainard.

Technical Analysis

While 21-day Exponential Moving Average (EMA) around 1.2860 acts as immediate support, monthly low near 1.2770 can restrict further declines. On the upside, 1.3000 and the previous month high around 1.3015 will be the key to watch during the rise.