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GBP/USD benefits from USD weakness ahead of UK data dump

  • GBP/USD snaps four-day losing streak.
  • Broad USD weakness, risk-on help buyers to ignore Brexit worries, UK-Iran tension.
  • November month data dump, trade/political headlines will be the key.

GBP/USD stays mildly bid around 1.3040 while heading into the London open on Monday. The pair ignores the dovish tone from the BOE and the EU-Irish pessimism surrounding the Brexit while respecting British forms’ positive outlook. Investors will have a slew of monthly activity and output data to gain fresh impulse.

Doves at the BOE seem too weak to defy the US dollar declines. The BOE’s member Gertjan Vlieghe was the second, after Governor Mark Carney’s dovish messages last-week, who sees easy money policy going forward. During the weekend, the central bank policymaker said, “would vote in favor of a looser monetary policy during the late-January meeting.”

On the Brexit front, Irish Deputy Prime Minister Simon Coveney followed the footsteps of EU’s chief Brexit negotiator and European Council President while citing doubts on the UK PM Boris Johnson’s December 31, 2020, Brexit deadline.

Alternatively, a survey conducted by the Confederation of British Industries (CBI) and the Price Water Cooper (PwC) showed that the business moral amongst the UK’s financial firms jumped for the first time in four years.

The USD declines could be attributed to Friday downbeat employment numbers as well as the recent reduction in the greenback’s safe-haven demand. The progress at the US-China trade front and receding odds of the US-Iran war could be cited as reasons contributing to the lack of risk-safety. With this, the stocks in Asia and the S&P 500 Futures stay mostly positive while the US 10-year treasury yields show no signs of movement amid the Japanese holiday.

Looking forward, UK’s November month Industrial Production, Manufacturing Production, monthly GDP and trade numbers will be the key to watch. While a likely contraction in the production numbers to -0.2% MoM could join a fall in trade numbers, expected no change in the GDP figure of 0.0% can keep the pair’s moves under check. However, any moves will be weighed against the BOE Governor’s downbeat statement that doubted economic strength.

Elsewhere, the US-China trade story, the UK-Iran tension and the US-Iran headlines will keep traders entertained amid no major data/event from the US.

Technical Analysis

GBP/USD prices are likely to find challenges in extending the recent recovery unless breaking a descending trend line since December 13, at 1.3125 now. Alternatively, pair’s declines below 50-day SMA level of 1.3023 will be capped by a two-month-old rising trend line, near 1.2970.

 

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