GBP/USD fades bounce off six-week low near 1.2030 as UK PMIs, Fed Minutes loom

• GBP/USD begins the key week on a negative note, retreats towards key support.
• Upbeat UK data, market’s consolidation triggered corrective bounce off important support line.
• Mixed UK data, Brexit woes join British labor problem to challenge Cable buyers.
• Hawkish Fed bias, upbeat US data signals further downside ahead of crucial catalysts.

GBP/USD retreats towards the 1.2000 psychological magnet, down 0.13% intraday on early Monday, as fresh Brexit fears join the mixed fundamentals surrounding the UK and the Bank of England (BoE). Even so, the Cable pair traders remain inactive amid the US holiday and cautious mood ahead of the key activity data.

Recently, the Telegraph came out with the news suggesting a fresh Brexit blow as it said, “UK PM Rishi Sunak forced to ‘pause’ protocol deal amid backlash from senior Tories and DUP.” It should be noted that the British media previously raised expectations of the much-awaited Brexit deal in Northern Ireland. On the same line, EU Commissioner for Interinstitutional Relations and Foresight Maroš Šefčovič said on Friday that they made good progress in Brexit talks with British Foreign Secretary James cleverly, as reported by Reuters.

Elsewhere, the UK reported a mixed bag of data, mostly downbeat, and raised doubts on the BoE’s ability to further propel the rates, as well as help the economy avoid recession.  That said, the UK Consumer Price Index (CPI) for January marked the third monthly decline after rising to the 41-year high in October whereas the UK Retail Sales came in firmer for the said month. However, the latest British job numbers appear mixed.

On the other hand, the firmer prints of the US Consumer Price Index (CPI) and Retail Sales followed the previously flashed upbeat readings of employment and output data and propelled the odds of the US economy witnessing more inflation ahead. The same joins hawkish Federal Reserve comments to underpin the firmer US Treasury bond yields and the US Dollar to exert downside pressure on the GBP/USD price.

It’s worth noting that the UK’s grim labor conditions also weigh on the Cable price as most of the Union workers aren’t ready to accept the government’s offer and keep stopping the output.

Against this backdrop, the US 10-year Treasury bond yields rose to the highest levels since early November while the equity benchmarks were mostly in the red. That said, the US Dollar Index (DXY) marked the third consecutive weekly gain.

Looking forward, the first readings of the UK’s February month PMIs will join the monetary policy meeting minutes by the Federal Reserve (Fed), up for publishing on Wednesday, as well as the Thursday’s second reading of the US fourth quarter (Q4) Gross Domestic Product, to direct immediate GBP/USD moves.

Technical analysis

An upward-sloping support line from the mid November 2022, close to 1.1980 at the latest, appears an important support to watch during the GBP/USD pair’s downside.