GBP/USD bears flirt with 1.3900 on BOE Super Thursday
- GBP/USD licks its wounds around weekly low, off intraday bottom.
- Covid, Fedspeak underpin US dollar strength amid a quiet session.
- BOE expected to reiterate status-quo, economic forecasts, tapering hints eyed.
- US data, comments from Fed officials, coronavirus and Brexit headlines are important too.
GBP/USD reverses early Asian losses, bounces off intraday low towards 1.3900, during a sluggish session ahead of the Super Thursday’s London open.
Unlike other major currency pairs that portray the US dollar strength, except for the EUR/USD, the cable remains sidelined, mostly heavy, as it will be a tough task for the Bank of England (BOE) policymakers to reiterate bullish bias amid virus woes in the UK. Also challenging the pair moves could be the pre-NFP woes and stimulus hopes, not to forget Brexit positive headlines.
Although July’s PMIs are a motivation to Governor Andrew Bailey and Company, GDP miss and the pace of spreading Delta covid strain in the UK becomes the key concern. Also, fears of reflation and following the Fed offer additional challenges to the “Old Lady” members. Amid these concerns, the BOE is expected to leave the benchmark interest rate unchanged at 0.1% and hint the bond-buying program on course to reach its 895 billion-pound ($1.24 trillion) target size by the end of this year. However, comments from Bailey and quarterly economic forecasts will be crucial to watch.
Read: Bank of England Preview: Five reasons the doves are set to win Super Thursday, GBP/USD may dip
It’s worth noting that the UK witnesses a bit easy covid numbers than those from the US, China and Australia, which in turn keeps GBP/USD buyers hopeful. Also on the positive side were Brexit positive comments as British artists are granted visa-free touring to the 19 EU countries in a post-Brexit deal. Furthermore, UK Brexit Minister David Frost teased the solution to industry problems, to be unveiled by autumn, while spreading positive vibes.
On the other hand, the US Dollar Index (DXY) remains firmer, backed by upbeat Treasury yields, as the global rush for risk-safety amid coronavirus woes joins the chatters over Fed’s tapering. After Fed Vice Chair Richard Clarida renewed 2021 tapering concerns, Treasury Secretary Yellen said, per Bloomberg, “By the end of this year inflation will be running at a level consistent with the Fed’s target.” Following that, San Francisco Federal Reserve Bank President Mary Daly also flashed clues favoring the monetary policy tightening while speaking at the PBS Newshour interview. The Fed policymaker said, per Reuters, that her Modal outlook is that fed will be able to taper later this year or early next year. Elsewhere, Texas marks the biggest one-day increase in covid cases since early February whereas Japan reported all-time high daily infections on Wednesday. Further, Australia refreshes the highest daily infections since August 2020 while China’s recent virus figures were also grim.
Amid these plays, stock futures print mild gains and the US Treasury yields are firmer by the press time, offering a clueless morning to the GBP/USD traders before the key BOE interest rate decision.
Other than the BOE, US Jobless Claims, Fedspeak and virus updates could also entertain GBP/USD traders ahead of Friday’s UK Nonfarm Payrolls.
Technical analysis
An impending bearish cross of 50-DMA to the 100-DMA tests the GBP/USD traders amid steady RSI line and receding bullish MACD histograms, suggesting further weakness of the quote. Hence, a sustained trading below the weekly bottom surrounding 1.3875 will be required to confirm the bearish DMA pattern and drag the prices toward June’s low of 1.3786. On the contrary, positive surprises-backed recovery moves will be initially challenged by a convergence of the key moving averages close to 1.3925, break of will shift market focus to the 1.3985–4010 broad resistance area comprising multiple levels marked since early May.