GBP/USD: Brexit woes battle bond tapering around 1.3750, US GDP eyed

• GBP/USD consolidates weekly losses, picks up bids to refresh intraday high of late.
• France threatens to block UK ships, Britain vows to retaliate in a fresh Brexit tussle.
• Chatters around BOE rate hike renews on reduced bond issuance in budget 2021.
• Bears await US GDP to justify Fed tapering tantrums, multi-year high inflation expectations.

GBP/USD pokes intraday high around 1.3750 as traders pare weekly losses heading into Thursday’s London open.

In doing so, the cable pair portrays the market’s indecision ahead of the key preliminary reading of the US Q3 GDP and the European Central Bank (ECB) meeting. Also restricting the quote’s moves are the mixed signals from home.

Among the negative catalysts are the fears of Fed tapering and Brexit drama at home. On the contrary, the likely BOE rate hike and optimism surrounding the US stimulus keep GBP/USD buyers hopeful.

In a stark Brexit action, France showed readiness to block the British ships from their ports in the next week should the UK refrain from easing controls over fishing. Britain, on the other hand, marked the ability to retaliate. Amid these plays, Chairman of the UK’s Office for Budget Responsibility (OBR) Richard Hughes said, per the BBC, “The impact of Brexit on the UK economy will be worse in the long run compared to the coronavirus pandemic.”

Alternatively, UK Chancellor Rishi Sunak announced measures relating to infrastructure, alcohol duty cuts and an increased budget for all departments totalling around £75 billion of giveaways. However, the emphasis on bond purchase reduction teased GBP bulls amid hopes of the Bank of England (BOE) rate hike.

On a different page, US-China tussles escalate over telecom and Taiwan while the policymakers in the White House push for faster progress on the stimulus and budget talks. It should be noted, however, that the escalating Fed tapering concerns underpin the US Treasury yields and probe the US Dollar Index (DXY) bears ahead of the key GDP data.

While the Brexit drama is likely to weigh on the GBP/USD prices, stronger-than-expected US Q3 GDP will strengthen the Fed rate hike expectations and add to the bearish impulse.

Read: US Third Quarter GDP Preview: A most uncertain estimate

Technical analysis

The cable pair broke an ascending support line, now resistance, from September 30 the previous day but refrained from closing below 50-DMA, around 1.3710 now. Given the bullish MACD signals and multiple supports around the 1.3710-3700 area, comprising 50-DMA and 50% Fibonacci retracement (Fibo.) of late July-September fall, the GBP/USD pair’s further downside remains doubtful. Meanwhile, a convergence of the previous support and 61.8% Fibo. level near 1.3770-75 guards the quote’s corrective pullback ahead of the 200-DMA level surrounding 1.3855.