GBP/USD refresh monthly low near 1.2300 ahead of Brexit news, UK data dump, focus on Fed, BOE

• GBP/USD takes offers to renew one-month low, dropped the most in five weeks the previous day.
• Strong US inflation data bolstered risk-aversion wave underpinning the US dollar’s safe-haven demand.
• Brexit, UK politics and China’s covid conditions exert additional downside pressure.
• Plans to edit NIP will be presented in UK’s House of Commons, British monthly data, BOE and Fed are important too.

GBP/USD stands on slippery ground as it takes offers to renew monthly low around 1.2300, after falling the most in five weeks. With this, the cable pair begins the week on the negative side after declining for the four consecutive days in the last.

The quote’s latest weakness portrays a blend of risk-aversion and Brexit woes, not to forget anxiety ahead of the key data/events scheduled for publication during this week, starting from today’s monthly economics from the UK.

The risk-off mood intensified on Friday after the US inflation data rose past market expectations and propelled the case of the Fed’s aggression. That said, the headline US Consumer Price Index (CPI) rose to 8.6% YoY versus 8.3% expected while the Core CPI jumped 6.0% YoY compared to the expected drop to 5.9% from 6.2% a month earlier. Alternatively, the record low of the University of Michigan Consumer Sentiment Index for June, to 50.2 versus revised down 58.1, added to the market's risk-off mood and favored the USD.

It should be noted that the Brexit woes and political instability in the UK join the lack of trust in the Bank of England (BOE) to exert additional downside pressure on the GBP/USD prices.

UK Foreign Secretary is up for presenting a Bill to edit a part of the Brexit deal, relating to the Northern Ireland Protocol (NIP), to the British House of Common on Monday. In addition to the European Union’s (EU) clear signals to retaliate against such moves by harsh measures, chatters that the European judges to be stripped of Northern Ireland protocol powers under new Brexit law, backed by the UK Telegraph, also amplify Brexit concerns.

Elsewhere, Tory rebels are trying hard to oust UK PM Boris Johnson and may use the latest Brexit bill for their purpose. However, a lack of clarity over the successor and Johnson’s Brexit aggression seem to help Johnson keep the throne, as per the market’s rumors.

Elsewhere, a blast in covid numbers in Beijing, as well as an increase in Shanghai’s virus figures, recall the COVID-19-linked activity restriction in China, which in turn weighed on the market sentiment and increase the US dollar’s safe-haven demand.

Amid these plays, the Wall Street benchmarks slumped and the US Treasury yields rallied, enabling the US dollar’s safe-haven demand.

Looking forward, the market’s fears of Brexit and doubts over the BOE’s ability to counter the inflation woes, due to the alleged late policy response, could keep the GBP/USD prices directed towards the south.

For the day, UK’s monthly Gross Domestic Product (GDP) for April, expected 0.2% versus -0.1% prior, will join Manufacturing and Industrial Production data, as well as the UK’s trade numbers for the said month, to offer immediate directions. Should the scheduled data print expected improvement, the GBP/USD pair may witness intermediate relief. Though, Brexit woes may reverse any corrective pullback on negative announcements.

Technical analysis

A sustained downside break of the 1.5-month-old horizontal support around 1.2400-2410 joins bearish MACD signals and an absence of the oversold RSI to direct GBP/USD bears towards the 2022 low near 1.2155. That said, 1.2250 may act as immediate support.

Meanwhile, recovery moves above 1.2410 need validation from a descending trend line from February and the 50-DMA, respectively around 1.2545 and 1.2620, to recall the buyers.