GBP/USD struggles above 1.3500 amid Brexit mum, Omicron optimism, US data eyed

• GBP/USD seesaws around two-month top, indecisive of late.
• Post-Brexit border checks widen supply crunch, no major meetings on the calendar.
• UK PM Johnson hopes to overcome virus wave without lockdown, Frost joins Tory anti-Covid regulations group.
• US ADP Employment Change, FOMC Minutes will be crucial for immediate direction.

GBP/USD hangs in balance around 1.3530 during the early Wednesday morning in Europe.

The cable pair portrays the market’s cautious sentiment around the highest levels in two months while consolidating the previous day’s gains inside a 20-pip trading range. It’s worth noting that an absence of major updates over Brexit and mixed concerns surrounding the South African covid variant, namely Omicron, adds filters to the GBP/USD pair’s latest moves.

Starting with the Brexit, Bloomberg spots the recent challenges faced by the British haulers due to the post-Brexit border checks and IT changes. “U.K. traders are falling foul of a new IT system policing goods crossing the English Channel, as companies grapple with a fresh wave of post-Brexit red tape.” The same adds to the already strained supply chain and challenges GBP/USD bulls. However, an absence of a major meeting between the European Union (EU) and the UK diplomats on the calendar seems to keep the impasse on the table for a while. It’s worth noting that the ex-Brexit Minister David Frost recently joined the Tory group that is against covid-linked regulations.

Elsewhere, the UK records over 200,000 daily covid infections and refreshed all-time high but upbeat scientific studies and comments from the World Health Organization (WHO) Incident Manager Abdi Mahamud helped UK PM Boris Johnson to stay positive. In his latest national address, UK PM Johnson said, “We have a chance to ride out this Omicron wave without lockdowns.”

On the other hand, the UK Manufacturing PMI rose past 57.6 previous forecast to 57.9 in December whereas the US ISM Manufacturing PMI dropped to the lowest in 11 months in December, 58.7 versus 60.0 forecast and 61.1 prior. Further, November’s US JOLTS Jobs Openings came in lower than the upwardly revised previous reading of 11.091M to 10.562M.

Additionally, comments from Minneapolis Fed President and 2022 voting FOMC member Neil Kashkari joined downbeat US inflation expectations, as per 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis (FRED) also favored GBP/USD bulls the previous day.

Looking forward, the anticipated easing in the ADP may help the GBP/USD pair to remain firm. However, the hawkish tone of the policymakers in the FOMC Minutes will be enough to recall the pair bears.

Read: US ADP December Preview: Suddenly its inflation, not jobs

Technical analysis

A 12-day-old rising wedge challenges the GBP/USD buyers amid sluggish oscillators. Though, the sellers may wait for a confirmation of the bearish chart pattern, as well as breaking the 50-SMA level of 1.3465, before taking fresh entry. Meanwhile, the wedge’s resistance line and multi-day-old horizontal hurdle surrounding 1.3610 will challenge the pair buyers during further advances.