GBP/USD picks up bids around 1.2600 as BOE and Brexit chatters join US dollar retreat

• GBP/USD consolidates the first daily loss in five, mildly bid of late.
• DXY fades bounce off monthly low even as Yellen, Biden support Fed actions to tame inflation.
• Allegations on UK PM Johnson, NIP tussle and doubts over BOE’s performance probe cable buyers.
• US ISM PMIs, qualitative catalysts could determine short-term moves.

GBP/USD marches confidently above 1.2600 as it reverses the first daily loss in five during Wednesday’s quiet morning in Asia. That said, the cable refreshed daily top around 1.2610 by the press time.

The quote’s recent uptick could be linked to the US dollar’s failure to keep the bounce off one-month low, despite the increasing chatters surrounding inflation and the Fed’s prudent role.

Recently, US President Joe Biden praised the US Federal Reserve’s (Fed) task in controlling price increases, followed by comments from US Treasury Secretary Janet Yellen’s acceptance that she was wrong about inflation. “US Treasury Secretary Janet Yellen said on Tuesday that she was wrong in the past about the path inflation would take, but said taming price hikes is President Joe Biden's top priority and he supports the Federal Reserve's actions to achieve that,” said Reuters.

The US Dollar Index (DXY) flashed the first daily positive in four by the end of Tuesday’s trading, despite a pullback from 102.17. The greenback gauge recovered the previous day as the US traders cheered hawkish comments from Fed Board of Governors member Christopher Waller, as well as upbeat data at home.

Fed’s Waller said that he supports lifting interest rates by another 50 bps at the next several Fed meetings and that the policy rate should be above neutral by the end of the year to reduce demand, reported Reuters. On the other hand, the US Chicago Purchasing Managers’ Index and CB Consumer Confidence both rose past forecasts for May whereas the Dallas Fed Manufacturing Business Index dropped to the lowest levels in two years.

At home, agitations over UK PM Boris Johnson’s party during the covid-led lockdowns join the disappointment of British business leaders over the Northern Ireland Protocol (NIP) to weigh on the GBP/USD prices. On the same line are the doubts over the Bank of England’s (BOE) role in taming inflation. “In a downbeat assessment of the UK’s economic prospects, the impact of Brexit and the potential ‘politicization’ of monetary policy, the US investment bank (Bank of America) believes that investors will dump the pound after sustained weakness,” per The Times.

Looking forward, the US ISM Manufacturing PMI for May, expected 54.5 versus 55.4 prior, will decorate the calendar while Fedspeak and other risk catalysts may entertain GBP/USD traders.

Technical analysis

A daily closing below the 13-day-old rising trend line keeps GBP/USD sellers hopeful until the quote stays below 1.2690.