GBP/USD: Bears attack 1.2100 with eyes on yearly low, UK/US PMI

• GBP/USD reverses the previous day’s bounce off two-week low.
• UK government braces for VAT relief but fails to impress GBP bulls amid economic woes.
• Doubts over ‘partygate’ investigation take rounds, Irish deputy PM accuses No10 over NIP.
• Final readings of UK PMI, US ISM Manufacturing PMI for June will be important for fresh impulse.

GBP/USD returns to the bear’s radar, after a one-day absence, as Brexit, politics and economic pessimism weigh on the Cable pair during early Friday morning in Europe.

Starting with the presently key issue, namely the economic slowdown fears, the United Kingdom reported no change in the Gross Domestic Product (GDP) for Q1 2021 during the final announcements published the previous day. That said, the UK GDP matched initial forecasts of 0.8% QoQ and 8.7% YoY. It’s worth noting that the fears of UK recession growth stronger as a jump in inflation joins Brexit woes, not to forget pessimism surrounding the Russia-Ukraine crisis and China’s covid resurgence.

To battle the economic pessimism, the UK government plans to ease the Value Added Tax (VAT). Prime Minister Boris Johnson's chief of staff Steve Barclay suggested reducing the 20% headline rate of the tax, The Times said, adding a temporary cut would reduce the tax bill for millions, per Reuters.

Elsewhere, UK Foreign Secretary Liz Truss defended the privileges committee inquiry into PM Johnson’s ‘partygate’ scandal as Tory backbenchers term it a 'kangaroo court'.

On the Brexit front, Irish deputy PM Leo Varadkar accused Number 10 of "siding" with unionists in seeking to scrap parts of the deal agreed in 2019, per the BBC. Additionally, The Guardian conveys a 14% fall in the UK exports to the European Union (EU) in 2021, mainly due to Brexit.

Alternatively, the risk-off mood joins cautious sentiment ahead of the key US ISM Manufacturing PMI for June, expected at 55.0 versus 56.1 prior, also propelling the US dollar’s demand. That said, the US Dollar Index (DXY) reversed from a 12-day high to snap a two-day uptrend by closing Thursday’s trading around 104.75, near 104.80 by the press time.

While portraying the mood, the S&P 500 Futures drop 0.80% to mark a five-day downtrend whereas the US 10-year Treasury yields reverse early Asian session rebound to 2.967%, refreshing the three-week low.

Moving on, the final reading of the UK S&P Global Manufacturing PMI for June precedes the UK ISM Manufacturing PMI for the said month to direct intraday moves. However, major attention will be given to the chatters surrounding recession, Brexit and politics for clear directions.

Technical analysis

The 61.8% Fibonacci retracement of June 14-16 upside, near 1.2110, restricts immediate GBP/USD downside before directing the bears to the yearly low of 1.1933. Meanwhile, recovery remains elusive until the quote stays below the aforementioned resistance line of around 1.2180. Even if the GBP/USD pair rises past 1.2180, it needs to cross the 200-HMA hurdle surrounding 1.2235 to recall the buyers.