GBP/USD holds onto recovery gains above 1.2300 as DXY retreats from 12-day top
- GBP/USD bounces off intraday low amid fresh US dollar pullback.
- Trade war fears, risk of virus resurgence benefited the greenback earlier.
- BOE’s Haldane warned of permanent scars on the British economy.
- Brexit, confusion over UK PM Johnson’s “Stay Alert” directives exert extra pressure on the Cable.
With the US Dollar stepping back from the multi-day top, GBP/USD recovers the early-day losses while taking the bids to 1.2320 ahead of the London open on Tuesday. Even so, the pair prints 0.11% losses amid the risk aversion wave, mainly fueled by the trade/virus headlines. Additionally, downbeat comments from the BOE policymaker add to the pair’s worries when the coronavirus (COVID-19) and Brexit concerns are already looming over the Cable traders.
An ex-member of the White House Coronavirus Task Force Team, Doctor Anthony Fauci, is expected to warn about the risks if the US reopens too quickly, per NY Times. Confirmed reports of the spike in the US virus cases were earlier generated by the NBC news. While the news adds to the overall risk-off sentiment, greenback seems to trim the early-day gains following the updates.
That said, the DXY, a gauge of US dollar against major currencies step back from the highest from April 24 to 100.25 by the press time.
On the contrary, BOE’s Chief Economist Andy Haldane earlier warned, as per the UK Times, that the pandemic will leave permanent scars on Britain’s economy as households and businesses cut back spending. Also weighing on the Cable could be the uncertainty surrounding the on-going Brexit talks wherein the European Union (EU) negotiators are accused of politicizing the UK’s financial services sector, per the City AM.
Further, the UK express also cites another negative catalyst for the pair in the form of pressure on the PM Boris Johnson to stick to the deadline as an alteration with need repeal of the UK laws. Elsewhere, the Tory leader’s “Stay Alert” guidance seems to have confused the British locals and needs further clarification.
While updates concerning Brexit, coronavirus (COVID-19) and US-China trade tussle can keep driving near-term pair moves, US inflation data will also be the key to watch. Concerning this, TD Securities said, “The overall CPI (forecast: -0.7% m/m) was likely pulled down by a plunge in gasoline prices, but core prices likely fell as well (we forecast: -0.2% m/m). Among core components, the most dramatic weakness will probably be reported for the travel-related parts, most notably airfares, other lodging (basically hotels) and car rental fees. We also expect a decline in apparel prices and some slowing in rents. All in, we expect the annual rates to slow to 0.5% for total CPI and to 1.7% for core.”
Technical analysis
The GBP/USD pair’s bounce off six-week-old support line seems to push the quote towards a 50-day EMA level of 1.2462. Though, a downside break below the said support line figures of 1.2280 can quickly fetch the quote to April month low of 1.2165.