GBP/USD retreats from 1.1530 amid Fed vs. BOE buzz

• GBP/USD eases from intraday high amid mixed concerns, cautious optimism in the market.
• Firmer US data, Brexit woes and the BOE’s Gilt operations test buyers.
• Mostly priced-in 75 bps rate hike from Fed, fresh Brexit woes keep sellers hopeful.
• FOMC announcements eyed for a clear view on rate hikes from December, BOE needs hawkish play to defend bulls.

GBP/USD pares intraday gains as it slides to 1.1506 heading into Wednesday’s London open. The Cable pair’s latest weakness could be linked to the increased anxiety ahead of the Federal Open Market Committee (FOMC) meeting. Also exerting downside pressure on the quote could be the chatters surrounding the Bank of England’s (BOE) next move and Brexit.

Also read: Fed November Preview: Is it time for a dovish signal?

The British government is breaching the withdrawal agreement with the European Union by requiring EU citizens to reapply for the right to live and work in the United Kingdom, an independent body set up to oversee citizens’ rights told a London court on Tuesday, reported Reuters.

On the same line, the BOE has already started its selling of gilt holdings and hence further directives for the Quantitative Tightening (QT) will be difficult for the “Old Lady”, as the BOE is called informally. Furthermore, former BoE deputy governor Charlie Bean said on Tuesday that the UK should consider interest cuts on banks' BoE reserves.

It should be noted that the firmer US data and the latest headlines surrounding US Federal Communications Commission (FCC) Commissioner Brendan Carr Taiwan visit seem to challenge the GBP/USD bulls. That said, the US JOLTS Job Openings increased to 10.717M in September versus the 10.0M forecast and upwardly revised 10.28M previous readings. Further, US ISM Manufacturing PMI increased to 50.2 in October versus 50.0 market forecasts and 50.9 prior. On the same line, final readings of the US S&P Global Manufacturing PMI for October rose past 49.9 initial forecasts to 50.4 but stayed below 52.0 readings for the previous month.

Meanwhile, headlines from China appeared to have recently favored the market’s sentiment amid softer US Treasury yields. The Governor of the People’s Bank of China (PBOC), Yi Gang, recently crossed wires and stated that China's economy remains broadly on track. “We hope the housing market can achieve a soft landing,” added the policymaker. Additionally, an official from the China Banking and Insurance Regulatory Commission (CBIRC) also helped improve the mood while saying that the property sector is now "stable".

The US 10-year Treasury yields drop one basis point (bp) to 4.04% at the latest as traders remain divided over the US central bank’s next move given the 75 bps rate hike and hopes favoring easy rate lifts from December. While portraying the mood, S&P 500 Futures snap a two-day downtrend to print a 0.20% intraday upside by the press time.

Looking forward, GBP/USD traders will pay attention to how well the Fed can defend the hawks even as the 75 bps rate hike is already priced in. Also, the clues for December’s rate lift will be closely observed for clear directions. Above all, Thursday’s BOE move will be the key as the British central bank needs to realign its priority under the new government.

Also read: BoE Interest Rate Decision Preview: A close call between 50 bps and 75 bps, GBP/USD set to suffer

Technical analysis

A one-week-old bearish channel restricts the short-term GBP/USD moves between 1.1575 and 1.1430.