GBP/USD cheers Brexit optimism around 1.3350 ahead of BOE’s Bailey

• GBP/USD snaps four-day downtrend to bounce off yearly low.
• Britain won’t trigger Article 16 until talks collapse, EU’s Sefcovic will visit London for negotiations on Friday.
• UK experts predict New Year surge in covid cases, virus-led death toll declines.
• BOE’s Bailey eyed for rate hike clues following the firmer jobs report, inflation and PMI data.

GBP/USD consolidates recent losses around the 11-month low, grinding higher around 1.3350 ahead of Thursday’s London open.

While a pullback in the US dollar could be well-cited for the latest rebound in the cable pair amid a sluggish Asian session, hopes of overcoming the Brexit deadlock also favor the quote of late.

Although the No.10 Downing Street spokesperson cites a substantial gap between the UK and EU views regarding Northern Ireland, the British Prime Minister Boris Johnson’s readiness, per Reuters, to work hard to solve the issue on hand keeps market players optimistic. That said, the British policymakers have also given consent to Irish PM Michael Martin that they won’t trigger Article 16 until the talks collapse.

On the same line were the lines from Bloomberg suggesting the positive progress over the Brexit talks. “Brexit Minister David Frost is pushing for a significant overhaul of the existing treaty, while European Commission Vice-President Maros Sefcovic is offering concessions within the framework of the existing deal.” It’s worth noting that the UK and the Eurozone were discussing relief for medical aids traveling through Northern Ireland and were hopeful of a solution ahead of the UK visit by EU’s Sefcovic, scheduled for Friday.

Also positive for the GBP/USD prices was a pullback in the US Treasury yields following the recently sluggish US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

Alternatively, Sky News quotes British Health Experts to cite a risk of New Year surge in the covid cases after the latest daily infections jump to 43,676 while the death toll eased to 149.

Amid these plays, stock futures are mildly bid tracking the previous day’s first negative daily close in three by the US 10-year Treasury yields. While the same pull the US Dollar Index (DXY) back from a 16-month high, the GBP/USD pair’s further rebound depends upon comments from Bank of England (BOE) Governor Andrew Bailey amid Thanksgiving Day Holiday.

Considering the latest improvement in the UK jobs and inflation data, not to forget firmer preliminary readings of November PMIs, BOE’s Bailey might reiterate his bullish bias for the rate hike and can help the GBP/USD to extend the corrective pullback. However, covid woes may challenge the policymakers, which in turn can drag the quote ahead of tomorrow’s key Brexit talks.

Technical analysis

Given the cable pair’s failures to rebound following the downside break of the September 2020 high, coupled with the bearish MACD signals, sellers are likely to keep the reins. However, a convergence of the 100-week SMA and a descending trend line from late July, around 1.3290-75 appears a major challenge for the pair bears. Meanwhile, corrective pullback remains elusive until crossing September 2020 top of 1.3482.