GBP/USD stays depressed below 1.3400 as Brexit woes battle softer yields ahead of Fed Minutes

• GBP/USD prints four-day downtrend, fades bounce off yearly low.
• EU's Šefčovič signals Brexit deadlock will prevail in 2021.
• UK PMIs keep BOE rate hike odds on the table but Fed hawks have an upper hand.
• DXY tracks US Treasury yields as market sentiment dwindles ahead of key US calendar events.

GBP/USD remains pressured around 1.3370, fading the early Asian rebound from yearly bottom heading into Wednesday’s London open.

The cable pair seems to struggle over Brexit headlines and mixed concerns amid a light calendar in the UK. However, the bears remain unconvinced before a slew of US data/events scheduled for release during the latter part of the day.

European Commission's Brexit negotiator Maroš Šefčovič marks his disappointment from the UK’s push for the detailed talks to signal no solution before 2022. “Šefčovič stressed that he was hoping the UK and the EU could still make ‘decisive progress this week’ on the issue of medicines trade between Great Britain and Northern Ireland, which would ‘generate positive momentum’ for the rest of the talks,” mentioned Politico.

Elsewhere, a rebound in the US inflation expectations joined US President Joe Biden’s Fed nominations to propel the Fed rate hike woes and weighed on the quote previously. That said, the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snapped a two-day downtrend to rebound from a fortnight low by the end of Tuesday’s North American session.

In doing so, the GBP/USD pair traders ignore firmer prints of the UK PMI data that fuels expectations of the Bank of England (BOE) rate hike. As per the preliminary PMI data for November, the UK Manufacturing PMI and Services PMI both rose past expectations and prior releases. On the contrary, US Markit PMIs flashed mixed numbers for November as the Manufacturing activity gauge rose past expectations and prior but not the Services index, which in turn weighed on the Composite figures. That said, US Richmond Fed Manufacturing Index crossed the expected figure of 5 but stayed below 12 previous readouts to 11 for November.

Amid these plays, Treasury yields dwindle and the US Dollar Index (DXY) struggle around 16-month while the stock futures print mild losses by the press time.

Given the bears holding the reins despite DXY pullback, the GBP/USD pair needs a strong blow, either from the economic calendar or Brexit headlines to recall the buyers.

Read: FOMC November Minutes Preview: Give us the economic proof

Technical analysis

A descending support line from late September triggered the cable pair’s recovery moves on Tuesday. Given the nearly oversold RSI conditions favoring the latest rebound, the pair’s advances towards a one-month-old resistance line near 1.3460 can’t be ruled out. However, the GBP/USD pair’s bearish trend can’t be ruled out until the quote stays below the 200-DMA level surrounding 1.3830. On the other hand, the pair’s sustained weakness needs a daily closing below the stated support line, around 1.3330 by the press time, to extend the south-run.