Blog: GBP/USD teases 1.3900 as US dollar sell-off supersedes Brexit woes – FXStreet

  • GBP/USD takes the bids near intraday high, rises for the second consecutive day.
  • EU pushes to Britain’s food standards, UK PM Johnson warned over ‘dangerous political vacuum’ in Northern Ireland.
  • UK joins global drive to rescue India, BOE’s Broadbent stays optimistic over British economy.
  • DXY refreshes multi-day low as market sentiment stays positive amid quiet session in Asia.

GBP/USD buyers flirt with the 1.3900 round figure, up 0.21% intraday, while heading into London open on Monday. In doing so, the cable stays up for the second consecutive day as the US dollar index (DXY) drops to the fresh low since March. The up-moves also take clues from a BOE policymaker’s economic optimism but ignores doubts over the successful Brexit deal.

Although off in New Zealand and Australia tests market moves during the Asia-Pacific session, the mild risk-on mood keeps exerting downside pressure on the DXY, which in turn backs the GBP/USD bulls.

Behind the market’s optimism could be the hopes of US infrastructure spending passage and expectations that India will gradually overcome the pandemic with global help. Recently, the UK joined the league of France, Germany, Saudi Arabia and the US to help New Delhi with the necessities to combat the record infections. Also on the positive side could be the European Union’s (EU) welcome to the vaccinated tourists from the US during summer vacations.

Furthermore, the Bank of England (BOE) Deputy Governor Ben Broadbent has forecast consecutive quarters of rapid growth but also warned that inflation will prove less predictable during an interview with the Telegraph newspaper, per Reuters. The news also helps the GBP/USD but fears of fading the UK’s economic transition to the north, as it did in the past, test the sterling buyers.

Meanwhile, the bloc’s rejection to respect the UK’s unilateral stand on Northern Ireland (NI) and push to alter food standards in return for a good post-Brexit trade deal tests the sentiment. Also, The Guardian came out with the news suggesting further geopolitical tensions in NI amid Brexit anger and pushes UK PM Boris Johnson to ease his demand. “Northern Ireland is in a dangerous political vacuum and could “fall over” unless the UK government acts swiftly, according to a cross-party group of former cabinet ministers with experience in the region,” the news said.

Even so, the Telegraph quotes PwC while saying, “The European Union will climb down and agree on a post-Brexit deal on financial services because the bloc needs London.”

Against this backdrop, S&P 500 Futures print mild gains while the US 10-year Treasury yields stay firm around 1.57% by the press time.

Although Brexit jitters and the pre-BOE, Fed mood can keep GBP/USD traders cautious, today’s US Durable Goods Orders may tame the buyers with upbeat expectations of 2.5% versus -1.2% prior.

Technical analysis

GBP/USD extends 21-day SMA level of 1.3820 towards the key 1.4010-15 horizontal resistance area.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s