GBP/USD: Bulls keep 1.2700 on the radar with eyes on BOE’s Bailey

GBP/USD takes the bids near 1.2655, up 0.27% on a day, while heading into the London open on Monday. While broad US dollar weakness could be considere  |  13/07/2020 05:13
  • GBP/USD carries Friday’s strength to take the latest U-turn from 1.2621.
  • UK Chancellor Rishi Sunak prepares another aid package, Michael Gove pushes to prepare for Brexit.
  • Significant differences prevail in the post-Brexit talks,
  • BoE’s Bailey to speak on Libor, British Home Secretary Priti Patel to announce post-Brexit immigration plans.

GBP/USD takes the bids near 1.2655, up 0.27% on a day, while heading into the London open on Monday. While broad US dollar weakness could be considered as the key reason for the Cable’s latest upside, hopes of another stimulus from the UK and efforts to tame the coronavirus (COVID-19) favor the bulls. Even so, traders await a speech by the BOE Governor Andrew Bailey and British Home Secretary Priti Patel for fresh impetus.

With the surge in the US COVID-19 numbers, odds of an extra aid package from the policymakers fail to defy the greenback bears. As a result, the US dollar index (DXY), a gauge of the US currency versus the majors, slips over 0.22% to 96.45 as we write.

Over the counter, UK Finance Minister Rishi Sunak isn’t yet tired of inflating the government’s push to hike the demand. Following his last week’s multi-billion pounds of the package, the Chancellor is anticipated, as per the UK Telegraph to introduce sweeping tax cuts and an overhaul of planning laws in up to 10 new "freeports" within a year of the UK becoming fully independent from the European Union in December.

Furthermore, news that a cross-party group of politicians will analyze the country’s pandemic situation and help overcome the crisis also offered a ray of hope to the pair traders. Additionally, the optimists also cheer research undertaken by Oxford University suggests positive results and Professor Robin Shattock suggests that there will be enough vaccine for each of the British people in the first half of 2021 if trials succeed.

On the contrary, the UK-EU talks again stalled during the last week with “significant differences”, per the Bloomberg, suggesting no remedy from the saga. As a result, the British Cabinet Minister warned businesses to stay prepared for the Brexit, irrespective of the outcome of the current negotiations.

Amid all these plays, markets seem to cheer increasing odds of further policy support with S&P 500 Futures and stocks in Asia-Pacific marking gains while the US 10-year Treasury yields staying clueless around 0.63%.

Looking forward, the British diplomat Priti Patel will offer further details of her point-based immigration system. The Guardian says, “The Home Office has previously revealed the core principles behind the forthcoming points-based system, which is meant to be introduced when the transition period from leaving the European Union ends on 1 January. Under the system, UK borders will be closed to so-called non-skilled workers and applicants will have to show a greater understanding of English.”

Additionally, the Bank of England Governor Andrew Bailey is up for participating in the panel discussion titled "Libor: Entering the Endgame". The BOE Chief will be accompanied by the officials from the Federal Reserve Bank of New York to speak about the key rate. While BOE’s Bailey has always signaled, indirectly, about the rate cut, other policymakers remain divided which in turn makes the case of GBP/USD more complex.

Technical analysis

Despite mostly positive fundamentals, a rising wedge bearish formation on the four-hour chart keeps the GBP/USD pair sellers hopeful unless the quote crosses 1.2715 pattern resistance. However, a sustained break of 1.2600 becomes necessary for the sellers to take entry.

 

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