- GBP/USD remains heavy around fortnight low, down for fourth consecutive day.
- UK policymakers signal extension of emergency powers used for lorries heading to France, IFA discussed Brexit.
- Britain braces for more booster shots as virus-led deaths jump to five-month high.
- USD gains could be linked to stimulus, Fed tapering concerns, US CPI in focus.
GBP/USD edges lower around 1.3835 amid Wednesday’s Asian session. The cable refreshed a two-week low the previous day as broad US dollar strength exerts additional downside pressure on the quote, other than the covid and Brexit-led woes.
On Tuesday, the US Dollar Index (DXY) printed a three-day winning streak to poke July’s high as the passage of US President Joe Biden’s infrastructure spending joined Fed policymakers’ cautious optimism. Further, the US 10-year Treasury yields had additional support from the safe-haven desk in the form of downbeat gold prices and Delta covid variant spread, which in turn propelled the greenback gauge and weighed on the GBP/USD prices.
At home, the UK government hinted to extend the emergency powers for trucks heading into France in a move to use Brexit rights, “signaling the government expects further cross-Channel disruption,” per The Guardian. It’s worth noting the British accord to give the Gower Salt Marsh Lamb a protected status also indicates Brexit jitters.
Elsewhere, the UK’s COVID-19 death toll, unfortunately, jumped to the highest in five months challenging the government’s efforts to tame the pandemic and claims that 75% of the British population is double-jabbed. To overcome the criticism, Boris Johnson-led army orders more Pfizer vaccines.
Amid these plays, S&P 500 Futures remain indecisive even as the Wall Street benchmark refreshed the record top. Further, the US 10-year Treasury yields add 1.7 basis points (bps) to refresh the monthly top.
Given the lack of major data/events from the UK, GBP/USD will keep their eyes on the qualitative factors, as well as the US Consumer Price Index (CPI) data for July for fresh direction.
Read: US July CPI Preview: Inflation data unlikely to change Fed tapering expectations
Technical analysis
Failures to stay beyond 50-DMA, near 1.3900, drags GBP/USD towards 200-DMA support of 1.3770. However, any further downside will be challenged by lows marked in April–May around 1.3670 and July bottom of 1.3572.
