GBP/USD stays pressured around 1.3650 on Brexit woes, UK Employment eyed

• GBP/USD holds lower grounds near one-week low, sidelined after three-day downtrend.
• Over 37% of UK businesses don’t they will survive due to Brexit, UK’s Truss braces for key talks with EU’s Safcovic.
• UK reports less than 85,000 cases, plan B could be reviewed this week.
• British jobs report, US traders’ returns will also be eyed for clear direction.

After a sluggish start to the key week, with the third consecutive loss-making day, GBP/USD prices remain depressed around 1.3645 during the initial hour of Tuesday’s Asian session.

In doing so, the cable pair struggles to cheer positive news from the covid front amid fears emanating from Brexit and politics, as well as cautious sentiment ahead of crucial UK jobs reports.

Global markets witnessed a slower start as the US cash and bond markets were off due to Martin Luther King’s Birthday. Even so, the US Dollar stayed firmer amid hopes of the faster Fed rate hikes in 2022, backed by Federal Reserve Bank of San Francisco President Mary Daly and New York Fed President John Williams on Friday. That said, the US Dollar Index (DXY) stretched the previous day’s rebound from a 10-week low before ending Monday with minor gains around 95.23.

At home, the UK reported 84,429 covid infections and 85 deaths, down from the 142,224 cases reported one week ago. With this, the British scientists turn confident that the virus curve is turning lower, which in turn helps the policymakers to rethink the ‘Plan B’ activity restrictions that are to expire on January 26.

Alternatively, UK PM Boris Johnson is under immense pressure to defend the ‘party gate’ gathering amid the initial days of the pandemic. Some among Britain’s key politicians, including Tories, demand Johnson’s resignation, while his popularity also fades ahead of local elections in England, Scotland and Wales on May 5. 

Elsewhere, Liz Truss, Secretary of State for Foreign, Commonwealth and Development Affairs of the United Kingdom braces for another round of key Brexit talks with the European Union (EU) Brexit Minister Maros Sefcovic. The due touched the subject a bit during the last week’s talks in the UK. Following that UK’s Truss tweeted, “practical solutions to protect the Belfast Good Friday Agreement and political stability, ensure free flow of goods between the UK and Northern Ireland, and to defend the sovereignty of decision-making for all.”

It should be noted that a country-wide survey by One World Express revealed that One in three UK business owners fear their company won’t exist anymore in a year as the Brexit onslaught intensifies. The new border checks and struggle to do business with the EU are among the key catalysts.

Looking forward, the UK’s Unemployment Rate for three months to November, expected to remain unchanged at 4.2% will join Claimant Count Change for December, prior -49.8K, to entertain the GBP/USD pair traders. Given the recently firmer UK fundamentals, as well as receding covid fears, the cable prices may witness further upside should the scheduled data flash upbeat readings, which in turn strengthen the Bank of England’s (BOE) hawkish bias.

Technical analysis

In addition to pullback from the 200-DMA, around 1.3740 by the press time, the GBP/USD pair’s downside break of an ascending trend line from December 20, near 1.3680, also directs the quote towards the 100-DMA level of 1.3550.