- GBP/USD fades the bounce off 1.2200, drops for the second day.
- UK PM Johnson to travel Brussels next month, agreement on fisheries might not be ready by July.
- Bi-annual questioning of the PM by the Commons Liaison Committee will exert pressure to investigate the Cummings scandal.
- US-China tussle intensifies but the market’s risk-tone remains positive ahead of key US data.
GBP/USD drops to 1.2250, down 0.07% on a day, while heading into the London open on Thursday. The Cable seems to portray the broad recovery in the US dollar while paying a little heed to the news suggesting UK PM Boris Johnson’s interference in the Brexit talks. Additionally weighing the pair could be the political challenges to the Tory government and the US-China tussle. While the UK calendar is silent, the PM Johnson’s questioning by the Liaison Committee and US data will be the key to watch.
As per the UK Times, Boris Johnson is to fly to Brussels next month for his first personal talks with European leaders in more than four months as Downing Street tries to revive Brexit negotiations.
The news came after the UK’s Chief negotiator David Frost reiterated the government’s support for no Brexit deadline extension while also turning down the hopes of a deal on fisheries ahead of July.
Elsewhere, the British locals keep criticizing the Tory leader for favoring his Chief aide Dominic Cummings for breaking the lockdown restrictions. The issue will be raised during today’s bi-annual questioning of the PM Johnson by the House of Commons’ Liaison Committee. On yet another issue, the UK government will roll out its coronavirus (COVID-19) contact tracing app in England on Thursday.
On the other hand, the US tightened its grip over China with the House of Representatives passing a bill to sanction the diplomats involved in the Xinjiang case. There are some more sanctions, as per the US President Trump and Secretary of State Mike Pompeo, in the pipeline.
Even so, the market’s risk-tone remains positive with the US 10-year Treasury yields extending gains towards 0.70% while most stocks in Asia flash gains by the press time.
Considering the lack of major data on the UK’s calendar, the US first revision to the Q1 GDP, April month Durable Goods Orders and weekly Jobless Claims will be the key to watch. Concerning these events, Westpac said, “The second estimate of Q1 GDP is set to confirm the 4.8% annualized contraction from the flash read. Following this, April durable goods orders are expected to fall by a record of 19.1%. Turning to the housing market, April's pending home sales are set for another weak print of -15.0%. Under normal circumstances, the beginning of summer would mark the peak selling season. Yet again, the market will closely watch initial jobless claims (market f/c 2100k). Finally, the May Kansas City Fed index will be released (market f/c -22), and the FOMC’s Williams (01:00 AEST) and Harker (05:00 AEST) will speak.”
Failures to cross 50-day EMA, at 1.2370 now, drag the GBP/USD pair towards an eight-day-old ascending support line, at 1.2210 now. Though, a break of 1.2210 might not refrain from aiming 1.2165 and monthly low near 1.2075.