GBP/USD drops back below 1.2600 as Brexit news, NI elections test bulls ahead of BOE

• GBP/USD pulls back from weekly top, consolidates the biggest daily gains in 13 months.
• UK PM Johnson renews NI protocol jitters amid Irish elections, pushing EU over compromise.
• USD struggles for clear directions around one-week low after the post-Fed slump.
• BOE is likely to announce 25 bps rate hike but bulls need more to keep control.

GBP/USD takes offers to renew intraday low around 1.2580, extending the pullback from the weekly top while paring the heaviest daily jump since April 2021. Headlines concerning Brexit hardships and cautious sentiment amid the Northern Ireland (NI) election, as well as ahead of the Bank of England (BOE) monetary policy, seem to favor sellers during early Thursday morning in Europe. That said, the post-Fed USD weakness propelled cable the previous.

UK PM Boris Johnson renewed Brexit woes by giving the European Union (EU), “one last chance” to compromise over Northern Ireland (NI) protocol, per The Times. The move could have been a political gimmick as NI elections begin on Thursday.

Also weighing on the GBP/USD prices are headlines challenging the risk appetite, mainly emanating from the European Union (EU) and China. The EU’s sixth round of sanctions on Russia and readiness for more hints at further hardships for Western friends including the UK. Elsewhere, the US Securities and Exchange Commission (SEC) added over 80 Chinese firms to the list of companies facing probable delisting from the US exchanges while the covid conditions also remain grim in the world’s second-largest economy.

Amid these plays, the S& 500 Futures drop 0.10% intraday, snapping a three-day rebound from a yearly low, despite Wall Street’s rally.

Looking forward, the BOE is up for 25 basis points (bps) of a rate hike, as already conveyed in the previous meeting. Though, economic hardships due to the escalating inflation pressure market players to seek something more than what’s promised from the “Old Lady”. Should the British central bank match market forecasts, the GBP/USD may reverse the previous day’s gains while copying the USD’s conditions post-FOMC.

Other than the BOE, the US Jobless Claims, Nonfarm Productivity and Unit Labor Cost will also entertain GBP/USD traders ahead of Friday’s US jobs report.

Also read: BOE Preview: A 25 bps rate hike can’t save GBP bulls amid economic gloom

Technical analysis

GBP/USD rebound remains elusive unless crossing a downward sloping trend line from April 2021, around 1.2850 by the press time. On the contrary, lows marked during January 2019 and the latest bottom, respectively around 1.2430 and 1.2410, challenge the cable pair’s downturn.