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GBP/USD retreats from intraday high as it pares the biggest weekly gains in five.
Brexit deal talks stopped amid Tory revolt, UK nurses’ pay negotiations criticized during Sunak’s PMQs.
Hawkish Fed Minutes, comments from policymakers join geopolitical fears to probe Cable buyers.
US inflation expectations, absence of nuclear war fears put a floor under GBP/USD price.
GBP/USD witnesses a pullback from intraday high to 1.2060 heading into Thursday’s London open amid political and Brexit fears surrounding the UK. Also challenging the Cable buyers could be the broadly hawkish Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes and geopolitical woes concerning the Ukraine-Russia war. It’s worth noting, however, that the absence of Japanese traders and a light calendar limits the quote’s latest moves.
UK Prime Minister (PM) Rishi Sunak realized how thorny the Brexit issue is when he faced bitter questions in the first PMQs in the parliaments on Wednesday. Not only the Opposition Leader Keir Starmer but the Conservatives were also pushing for no change in the Brexit deal surrounding the Northern Ireland (NI) protocol that was recently opened for discussion. The talks raised fears of a Theresa May-type fall of Sunak’s PM status and challenged the Cable buyers.
In addition to the Brexit call, the UK government’s negotiations with the nurse union also probed the GBP/USD buyers. The Royal College of Nursing (RCN) held “intensive talks” with Health Secretary Stephen Barclay, per The Guardian, but other unions felt left out and the same raises risks of more strikes in the UK moving forward.
Elsewhere, a retreat in the US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED), joins mixed comments from US President Biden to probe the triggered US Dollar pullback earlier in the day.
That said, inflation expectations gained major attention after Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes signaled that the policymakers discussed going easy on the rate hike trajectory if needed. However, the broad discussion on the need for more rate hikes and hawkish comments from St. Louis Federal Reserve President James Bullard, as well as from Federal Reserve Bank of New York President John Williams, challenge the dovish bias surrounding the Fed.
On the other hand, US President Biden said that he thinks that his Russian counterpart isn’t up to using nuclear arms by backing off an international treaty. However, the fears surrounding the Ukraine-Russia war are far from over, with the latest edition of the West and China escalating the matter to the worse. Previously, the China-Russia ties seemed to have escalated the geopolitical woes as the US strongly criticized such moves and favored the rush towards risk safety.
While portraying the mood, S&P 500 Futures bounced off the monthly low to print mild gains around 4,020 whereas the Treasury bond yields remain sidelined amid off in Japan.
Moving on, a lack of major data/events could restrict GBP/USD moves but central bankers’ speeches can entertain the pair traders ahead of Friday’s US Core Personal Consumption Expenditures (PCE) Price Index data, the Fed’s favorite inflation gauge.
The RSI (14) prints lower lows but the GBP/USD price prints higher lows, which in turn portrays a hidden bullish divergence and favors the quote’s latest bounce off the one-week-old support line, at 1.2040 by the press time.
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