GBP/USD: Will chatters over Brexit Internal Market Bill supersede ECB?

• GBP/USD struggles to keep pullbacks from six-week low.
• European Commission Vice-President Maroš Šefčovič rushes to meet UK's Michael Gove after Internal Market Bill threatens Brexit treaty.
• US House Speaker Nancy Pelosi warns the British government over plans to break the Good Friday treaty.
• Risk-tone remains sluggish even as traders expect an upbeat economic forecast from the ECB.

GBP/USD attempts recovery from intraday low of 1.2976 to 1.2997 while heading into Thursday’s London open. The cable bounced off the lowest since late-July the previous day after the US dollar stepped back from one-month high. However, cautious moves ahead of the key Brexit talks in London and the upcoming monetary policy meeting by the European Central Bank (ECB) probe the buyers.

IMB versus WAB...

With the UK’s Internal Market Bill (IMB) crossing roads with the Brexit Withdrawal Agreement Bill (WAB), policymakers at the European Union (EU) are furious over the efforts to settle the past agreements. The same pushes them to term the British Prime Minister (PM) Boris Johnson, a wrecker, as per The Times, while rushing to England even as their Brexit negotiator Michel Barnier is already in London discussing the post-divorce trade deal.  The key issue is the UK’s adjustments concerning the Northern Ireland border that has been debatable for long.

Not only the EU but the US diplomats are also interested in the Brexit as House Speaker Nancy Pelosi recently warned Britain that breaking the Brexit treaty could imperil trade pact.

Other than the Brexit issues, the increasing numbers of coronavirus (COVID-19) cases in the UK also weigh on the Pound. This pushed the Tory leader to ban social gatherings of more than six people while also making the contact tracing compulsory in pubs and other venues where people meet.

On the other hand, the US policymakers continue to jostle over the much-awaited stimulus package even as the voting on the same is likely to take place on Thursday. Ahead of that the White House Chief of Staff Mark Meadows said, as per Fox Business News, that he is hopeful over more COVID-19 aid from GOP, Democrats.

Elsewhere, market sentiment stays mostly sluggish with S&P 500 Futures turning red after bouncing off a one-month low while Asia-Pacific shares remain mixed.

Moving on, updates from London and the ECB’s monetary policy meeting announcement will be the key. The ECB is more likely to offer no change in current policies and keep forecasts mostly unchanged with expectations of an upward revision to short-term catalysts. Alternatively, odds are rolling on both the direction for the Brexit talks as the recent entry of US comments pushes the Tory government to seriously take their challenge to the EU. Also highlighting the issue are warning from the global rating agency Fitch and ex-PM John Major about the no-deal Brexit.

Hence, London is expected to gain more media space than Brussels and may weigh on the GBP/USD pair. However, the ECB is known for revealing surprises and may supersede Brexit talks in a case of any wild moves.

Technical analysis

Unless bouncing back beyond 1.3135/40 area comprising 200-bar SMA on the four-hour chart and an upward sloping trend line from July 29, buyers are less likely to be convinced. Meanwhile, a downside break of the recent low near 1.2885 will drag the quote to a 61.8% Fibonacci retracement of July 14 to September 01 high, around 1.2860, before highlighting July 21 peak surrounding 1.2765.