GBP/USD: Brexit, coronavirus fears probe corrective pullback near 1.3250 as Fed, BOE eyed

• GBP/USD fades Friday’s rebound, remains pressured around yearly low.
• UK-EU Brexit talks remained lackluster, fishing rights, medicine supplies were the key hurdles of late.
• UK escalates covid alert level, PM Johnson pushes for booster shots for above 30s.
• Fed vs. BOE battle will be crucial, risk catalysts are also important as catalysts.

GBP/USD grinds near 1.3250, struggles to extend Friday’s rebound, as markets brace for the crucial week.

Alike other major currency pairs, the cable also cheered broad US dollar pullback after the US Consumer Price Index (CPI) refrained from providing any major blow to the markets than already feared. That said, the US CPI matched expectations of 6.8% YoY, versus 6.2% prior, while flashing the fresh 39-year high for November. Adding strength to the GBP/USD bounce were stable inflation expectations revealed via the University of Michigan Consumer Sentiment Index, to 70.4 for December.

Following the US data, global equities marked a relief rally while the US Treasury yields and the US Dollar Index (DXY) eased, helping the GBP/USD to portray a corrective pullback.

It should be noted, however, that an absence of breakthrough during the UK-EU talks over the medical supplies from the Northern Ireland (NI) border challenged the pair buyers. Also portraying the Brexit woes were news shared by the UK Express saying, “French fishermen are planning several blockades in Calais and other key ports in a bid to ruin Christmas for millions of Britons.”

Furthermore, rising COVID-19 cases pushed the UK government to announce an escalation in the virus alert levels, from 3 to 4. As per the latest official details, 1,239 fresh omicron cases took the national tally to 3,137, marking the biggest daily jump in the virus variant cases since its detection in Britain. Even so, UK Prime Minister (PM) Boris Johnson sounds hopeful to overcome the crisis and pushes for more vaccinations. The government recently advised citizens above 30 years to take booster doses of the coronavirus vaccine.

Looking forward, monetary policy meetings by the Bank of England (BOE) and the Federal Reserve (Fed) will be crucial to watch during the data-fest week. Also important will be the Brexit headlines and COVID-19 updates.

Overall, GBP/USD prices are likely to remain pressured as Omicron woes join Brexit fears and push the “Old lady” to refrain from the hawkish performance. However, the inflation remains hot and flashes fears of a wild card move.

Technical analysis

Although GBP/USD buyers remain absent unless witnessing a monthly descending trend line breakout, around 1.3295 at the latest, a downward sloping support line from September 29 near 1.3140 puts a floor beneath the prices.