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20 Jul 2021

GBP/USD: Bears cheer coronavirus, Brexit pessimism below 1.3700

  • GBP/USD stays depressed around the lowest levels since February.
  • US issues “Do Not Travel” alert for UK over covid concerns
  • UK PM Johnson said infections involving someone with two vaccinations have been rising.
  • Britain up for warning EU over NI protocol, BOE policymakers push back bullish bias.

GBP/USD teases lows marked in March/April as bears take a breather around 1.3670 amid Tuesday’s Asian session. In doing so, the cable pair justifies the market’s fears over the Delta covid variant as well as Brexit woes. Also weighing the quote could be the Bank of England (BOE) policymakers’ pushing back of tapering and rate hike concerns.

With the coronavirus (COVID-19) infections above 50,000, around yearly highs, UK PM Boris Johnson stayed firmer over quarantine rules while also signaling the pandemic is “far from over”, per The Sun. The British politician also said, per Reuters, “infections involving someone with two vaccinations have been rising.” On the same line, the US raises the UK’s travel alert to “Level 4” which advises to not travel, even if an emergency, without vaccination.

Elsewhere, UK Brexit Minister David Frost again jostles with the Northern Ireland (NI) protocol and market chatters are on the spike that Britain will warn the European Union (EU) that they can turn down the Brexit deal. On the other hand, the UK Express recently said, “The city of London could be replaced as Europe's financial capital by the likes of Amsterdam, Dublin and Frankfurt, the European Commission's financial service chief has pledged, as she lightly poured cold water on an equivalence deal with the UK.”

It’s worth noting that the BOE policymakers, namely Katherine Mann and Jonathan Haskel turned down the hopes of monetary policy tightening and added further downside pressure on the GBP/USD.

Amid these plays, S&P 500 Futures consolidate Wall Street’s losses amid a quiet morning in Asia whereas the US 10-year Treasury yields dropped the most since November 2020 and await fresh clues around 1.20% by the press time.

Looking forward, the coronavirus updates will join the Brexit headlines to keep GBP/USD traders busy. Also adding to the watchers’ list are the US housing numbers and reflation woes.

Technical analysis

Sustained trading below the March-April low of 1.3670, as well as 200-DMA near 1.3705, becomes necessary for the GBP/USD bears to keep the reins.

 

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