GBP/USD awaits Brexit talks, UK Retail Sales as bulls battle 1.3500 hurdle

• GBP/USD stays determined to snap three-week downtrend, grinds higher of late.
• Upbeat jobs report, inflation highlight UK Retail Sales for October amid BOE rate hike concerns.
• UK’s Frost, EU’s Sefcovic to jostle over Northern Ireland protocol.
• Fedspeak, yields to also gain market’s attention amid a light calendar.

GBP/USD prints four-day uptrend, taking bids around 1.3500 amid early Asian session on Friday. Although broad US dollar weakness and the recently firmer hopes of the Bank of England’s (BOE) rate hike keep buyers hopeful, upcoming UK Retail Sales for October and the key Brexit talks warrant caution.

After witnessing a softened UK rhetoric of Brexit, the European Union (EU) cheered its tough negotiating stance. However, U.K. Brexit minister David Frost said in the House of Lords on Thursday, per Bloomberg, “I would suggest that our friends in the EU don’t interpret the reasonable tone that I usually use in my discussions with them as implying any softening in the substantive position.” The policymaker also added, “Whatever messages to the contrary the EU may think they’ve heard or read, our position has not changed.”

It’s worth noting that the two sides recently inched closer to amend a part of the Northern Ireland (NI) protocol change that hinted at easing the Brexit woes earlier in the week. However, recent comments from UK’s Frost suggest that nothing has changed. The same highlight today’s meeting between the UK Brexit Minister Frost and his EU counterpart Maros Sefcovic in Brussels.

Bloomberg updates the topic by saying that the EU has offered compromises that it says would reduce customs checks on goods arriving in Northern Ireland by half, and inspections on many food products by 80%. But the U.K. shot the proposal down, saying it “did not currently deal effectively with the fundamental difficulties.

Elsewhere, the coronavirus woes also challenge the GBP/USD bulls even as the early week prints of the UK employment report and inflation data keep them hopeful.

Following the firmer prints of the UK Consumer Price Index, the BOE rate hike odds jump to make it almost certain that the “Old Lady” will announce a rate lift in the next month. However, today’s UK Retail sales for October, expected to jump 0.5% MoM versus -0.2% prior, will be crucial for determining the BOE’s next move.

Read: Sterling eyes higher territory north of $1.35 ahead of retail sales

It’s worth noting that the reduction in the US Treasury yields weighs on the US dollar and also underpin the GBP/USD advances. Hence, Fedspeak should be added to the watcher’s list too.

Technical analysis

A clear upside break of the monthly resistance line, now support around 1.3370, directs GBP/USD bulls towards the 1.3570-80 hurdle comprising 21-DMA and early October lows. Also favoring the pair buyers are the MACD conditions on the daily chart that teases bullish cross.