GBP/USD: Drops back below 1.3900 on US dollar bounce, Brexit woes ahead of UK PMI
- GBP/USD consolidates the previous day’s gains, teases intraday low of late.
- UK may have a good post-Brexit deal with India but may struggle over relations with the US and the EU.
- France rejects UK's provisional changes to fishing licenses, G7 Foreign Ministers discuss geopolitics, covid.
- Virus woes weigh on risk sentiment, second reading of UK Manufacturing PMI, Brexit chatters eyed.
GBP/USD fades bounce off intraday low surrounding 1.3880, down 0.20% on a day, while heading into the London open on Tuesday. The consolidation of the previous day’s upbeat market sentiment, amid the coronavirus (COVID-19) woes in Asia-Pacific, recently seems to weigh on the cable. Also on the negative side could be the Brexit updates and pre-UK Manufacturing PMI cautious sentiment.
Despite signing a £5 million deal with UK-based drinks giant, France hasn’t eased its Brexit bias as the ex-peer has called on the European Commission to intervene after rejecting Britain’s provisional changes to fishing licenses under the Brexit agreement, per a French media report. The law could have negatively affected the bloc’s fishers, mainly from France, in the Channel Islands.
Not only the European Union (EU) but America may also not please the UK, as far as the post-Brexit trade deal is concerned. The Daily Express hints, per insider source, that US President Joe Biden to unravel his anti-Brexit fury with the UK by pushing any bumper trade deal with Britain to the "backburner".
Alternatively, the UK is targeting a strong deal with India and is helping the nation to overcome the pandemic.
Elsewhere, British PM Boris Johnson hopes to stay on the path to ease activity restrictions on June 21. On the other hand, Federal Reserve Chairman Jerome Powell and New York Fed President John Williams both sound optimistic over the nation’s economic recovery off the covid.
It’s worth mentioning that Foreign Ministers of the Group of Seven industrialized nations (G7) are discussing various issues ranging from geopolitical and trade fears from Russia and China to the coronavirus (COVID-19) in London. During the first day, the US and the UK sought global support to tame Kremlin and Beijing.
Amid these plays, S&P 500 Futures print mild losses and backs the US dollar index (DXY) to portray a corrective pullback by the press time.
Looking forward, the final reading of the UK’s Manufacturing PMI for April, expected to confirm 60.7 initial forecasts, will offer immediate direction to GBP/USD prices. Additionally, the G7 and the British traders’ reaction to the latest risk catalyst after a long weekend will also be the key to follow for fresh impulse.
Technical analysis
A six-week-old ascending trend channel keeps GBP/USD buyers hopeful until the quote stays above 1.3750. Also acting as the key support is the 200-day SMA near 1.3770. Meanwhile, a downward sloping trend line from April 20 near 1.3960 guards recovery moves ahead of the 1.4000 hurdle.