GBP/USD bulls approach 1.3600 despite UK’s Brexit, political jitters, Fed/BOE speakers eyed
- GBP/USD benefits from softer USD, picks up bids during two-day run-up.
- Yields retreat from 2.5-year high amid mixed concerns over inflation.
- UK PM Johnson’s mini-shuffle hints to overcome Brexit deadlock, UK PAC criticizes Brexit.
- Speeches from BOE Chief Economist Huw Phill, Fed Cleveland President Loretta J. Mester will be observed for intermediate clues.
GBP/USD extends the previous day’s rebound from 100-SMA towards 1.3600 during early Wednesday morning in Europe. That said, the cable pair cheers softer US dollar to pick up bids to 1.3565 by the press time.
US Dollar Index (DXY) prints the biggest daily loss in a week, down 0.12% intraday around 95.50 at the latest, as the US Treasury yields retreat from the multi-day high flashed the previous day.
US 10-year Treasury yields jumped to the highest levels since July 2019 the previous day before recently easing to 1.945%. The bond coupon eased even after San Francisco Fed President Mary Daly favored the March rate hike in her latest speech. The policymaker additionally mentioned, “Fed can't be overly aggressive on rate increases,” while saying, “US inflation could get worse before it gets better.”
On the other hand, UK PM Johnson’s cabinet reshuffle raised doubts over his political power despite suggesting faster Brexit progress. “Boris Johnson put Jacob Rees-Mogg in charge of delivering the benefits of Brexit in a mini-reshuffle of ministers that sought to shore up the U.K. prime minister’s support within the ruling Conservative Party.”
Also portraying the Brexit woes is the latest report from the UK’s Public Accounts Committee (PAC). “Brexit has had a ‘clear impact’ on Britain's trade volumes and new border arrangements have added ‘costs’ to UK business,” said the report.
It should be noted, however, that the “first week-on-week fall in England and Wales (covid-led) deaths so far this year,” per The Guardian keeps buyers hopeful.
Looking forward, GBP/USD traders will pay close attention to the comments from the BOE and the Fed policymakers as inflation is the hot topic. Should BOE’s Phill fail to convince the markets of a recent rate hike, the cable pair may witness a pullback.
Technical analysis
The GBP/USD pair’s successful trading beyond the 100-DMA level near 1.3505 directs the quote towards a three-week-old resistance line near 1.3595.