The GBP/USD stays in the red and trades within shouting distance of the key psychological mark 1.30 (low Jan.20) during the European session on Wednesday.
Earlier today, the cable was weighted down by tensions in the US-UK relations as the British government didn’t follow the States’ suit and allowed Chinese hi-tech giant Huawei to provide non-core elements for the UK’s 5G infrastructure though the company’s role remained limited. The decision was criticized by the Republicans that can sour the US-UK negotiations of trade deals during the US Secretary of State Mike Pompeo’s visit to London today.
However, the market reaction to the news was quite muted ahead of the BoE meeting tomorrow. The odds for the Bank to ease its monetary policy have never been so high (recent disappointing data and Carney’s dovish comments had their effect), and many analysts believe that Britain’s central banking institution will cut rates by 25 basis points on Thursday. Such speculations also weaken the GBP as investors prefer to wait and see.
Meanwhile, the UK will leave the EU in two days and the concerns over the UK-EU trade agreements persist. On Monday Irish PM Leo Varadkar expressed his doubts about Boris Johnson’s plan to strike a trade deal with the European Union till the end of the year. That also worries traders and makes the cable decline.
Moving on, the DXY sits comfortably above the 98.00 mark and aims at November’s high at 98.54 in the wake of strong rise of the US Durable Goods Orders yesterday. The upside momentum in the USD puts a lid on the major’s recovery. Later in the NA session, the US Good Trade Balance and Pending Home Sales will be published ahead of the Fed Interest Rate Decision that will probably steal the show. Tomorrow’s BoE meeting may also play an important role in the major’s dynamics.
From the technical point of view, the GBP/USD fluctuates in the 1.3010 region losing 0.10% on a daily basis and sticks to the tight range between 1.3005 and 1.3031. It trades below 20 and 50 SMAs but remains above the 100 and 200 moving averages. The support awaits at $1.2960-75, $1.2905-20 and $1.2880 while the resistance lies at $1.3065, $1.3105 and $1.3170. Thus it would prudent to see some strong dynamics in the major before placing any aggressive bets.