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GBP/USD: Modestly changed to 1.3050 amid Brexit concerns, greenback strength

  • GBP/USD holds onto recovery gains despite Brexit uncertainty looms.
  • House of Lords sends the UK PM WAB back to Commons for voting, the ping pong period is expected due to five changes.
  • EU is likely to offer a tough Brexit deal, increases the odds of harsh departure.

GBP/USD stays mildly bid to 1.3040 while heading into the London open on Wednesday. The pair earlier recovered for the two consecutive days on upbeat UK fundamentals and the US dollar weakness but the Brexit fears might have weighed on the quote off-late.

The House of Lords passed the UK PM’s Withdrawal Agreement Bill (WAB) back to Commons with five changes that marked the Conservatives’ defeat for the first time after the general election. The bitter one of them is concerning the EU nationals and Child refugees that the Tory leader was publicly against. Considering the ruling party’s majority in the House of Commons those amendments are likely to be turned down and hence the period for WAB to roam between Houses unless final terms are agreed is expected to last longer.

On the other hand, The UK Express came out with the news that the European Union (EU) is preparing for a harsh deal to Britain. Even if it could have easily be gauged from the regional leaders’ latest behavior, the news could weigh on the initial Brexit talks between the EU and the UK.

Over the counter, US President Donald Trump’s impeachment and the outbreak of Chinese coronavirus seem to weigh on the market’s risk tone. Even so, the US 10-year treasury yields rose two basis points (bps) top 1.79% by the time of writing.

Given the lack of major data from the UK, except for the January month CBI Industrial Trends Survey, expected -23 versus -28 prior, markets will keep eyes on the trade/political headlines for fresh impulse. During the US session, second-tier data will entertain traders. Considering the same, TD Securities said, “We expect existing home sales to rebound a modest 1.3% m/m to a 5.42mn-unit AR in Dec following a 1.7% drop to 5.35mn in Nov. In line with the ongoing improvement in the housing sector, this would keep the average level in H2 above that of H1 2019 and 2018. Note that this series is highly volatile.”

Technical Analysis

21-day SMA and the monthly trend line offers key resistance confluence around 1.3080/85, a break of which can recall 1.3120 and 1.3200 on the chart. Alternatively, 1.3000 and 1.2950/55 restrict the pair’s short-term declines.

 

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