GBP/USD: Mildly offered near 1.3650 as Brexit optimism battles pre-Fed, BOE anxiety

• GBP/USD prints three-day downtrend near the mid-October levels.
• France halts fishing-linked sanctions on UK before Thursday’s meeting.
• BOE rate hike expectations jump to 100% amid strong inflation.
• Risk catalysts keep the driver’s seat amid a light calendar.

GBP/USD remains on the back foot around 1.3650, down 0.09% intraday heading into Tuesday’s London open. In doing so, the cable pair prints a three-day downtrend as the market prepares for the key central bank events scheduled for Wednesday and Thursday, namely the US Federal Reserve (Fed) and the Bank of England (BOE) verdicts in that order.

While the market’s anxiety ahead of the Fed and BOE helps the US dollar to remain firmer, recently positive Brexit headlines help the GBP/USD to probe bears.

Among them is the French pause to levy sanctions on the UK over the Brexit-led fishing raw. France stopped previously announced punitive measures on the British boats following the issues of nearly 50 additional licenses to French boats to fish in its waters by the government of Jersey, per The Independent. On the same line, Reuters said that France received first signals from UK authorities to speed up talks, an answer to the latest French proposals is expected by Wednesday. It’s worth noting that the UK’s Brexit Chief David Frost will head to Paris for speedy negotiations on Thursday. However, there are many challenges other than the fishing tussles, like the Northern Ireland (NI) protocol, which in turn may hinder Brexit optimism going forward.

On the other hand, CME’s BOEWatch tool shows a 100% probability of a rate hike move during the meetings in November and December. The reason could be linked to around 5.0% UK inflation, double the BOE’s target. Though a jump in the UK’s covid infections, recently to 40,077 from 38,009 reported the previous day, challenge the likely move by the “Old Lady”.

Other than the market’s anxious mood ahead of the knife-edge BOE decision, up for publishing on Thursday, mixed US PMI and China’s latest appeal to the local governments to stock food for winter weigh on the market sentiment, underpinning the US dollar’s safe-haven demand.

Moving on, the GBP/USD moves are likely to remain bearish as the greenback benefits from downbeat stock futures and risk aversion ahead of the key central bank events. Though, chatters surrounding US stimulus and Brexit headlines may entertain the pair traders.

Technical analysis

Given the GBP/USD pair’s downside break of 50-DMA, portrayed on Friday, as well as the sustained trading below 200-DMA amid bearish MACD signals, the bears are likely rushing towards a horizontal area including multiple levels marked since July 20, around 1.3575. Meanwhile, the corrective pullback may aim for a 50-DMA level of 1.3712 before the 50% Fibonacci retracement level of June-September south-run around 1.3830.