GBP/USD bears poke 1.1200 amid firmer DXY, UK’s political jitters

• GBP/USD remains pressured around intraday low during three-day downtrend.
• UK PM Truss loses another supporter but stays in power, Tory whips also sustain vote on fracking.
• Strong UK inflation, Hunt’s dismissal of “mini-budget” proposals fail to impress buyers.
• Risk-off mood, firmer yields underpin US dollar demand.

GBP/USD holds onto the bearish bias for the third consecutive day as sellers attack 1.1200 amid sluggish Thursday. The cable pair’s weakness could be linked to the broad risk-off mood, as well as the political pessimism in Britain.

After losing Kwasi Kwarteng, the ex Chancellor, UK PM Liz Truss had to forgo Interior Minister Suella Braverman, over a "technical" breach of government rules, per Reuters, which in turn raise questions on the future life of the present Tory government team. Even so, the Tory Chief  Whip and Deputy survived Wednesday’s voting in the British Parliament. “The motion by the main opposition Labour Party was defeated by 326 votes to 230 and the government proposal won, but some lawmakers said they were angry over the tactics, or lack of them, used by the government,” said Reuters.

Elsewhere, a jump in the US Treasury yields and risk-negative catalysts enables the US Dollar Index (DXY) regain its upside trajectory and weigh on the GBP/USD prices.

That said, US 10-year Treasury yields refreshed a 14-year high above 4.0% as market players rushed towards the risk-safety. The same weighed on the Wall Street and S&P 500 Futures afterward.

Behind the risk aversion could be the broadly firmer inflation numbers from Britain, Eurozone and Canada, as well as the hawkish Fed bets and pessimism conveyed by the Fed’s Beige Book.

As per the CME’s FedWatch Tool, markets price in around 95% chance of the Fed’s 75 bps rate hike in November. The hawkish Fed wagers seem to justify the upbeat comments from the Federal Reserve (Fed) policymakers and raise fears of economic slowdown. Recently, Chicago Fed President Charles Evans said that (they) need to make sure inflation pressures don't broaden further, which in turn suggests more rate hikes despite the recession woes. It should be noted that the Fed’s Beige Book added to the market’s fears by showing increased pessimism among the respondents.

Moving on, GBP/USD witness further downside amid a light calendar but the political jitters in the UK can keep the bears hopeful.

Technical analysis

In addition to the immediate support of 1.1220, an upward-sloping trend line from September 29, around 1.1155, will precede the 21-DMA level near 1.1130 to also challenge the short-term downside of the GBP/USD pair.

Alternatively, a descending resistance line from late August, around 1.1345, restricts the GBP/USD pair’s nearby upside.