GBP/USD seesaws around 1.3550 on UK’s political, Brexit risks ahead of PMI data

• GBP/USD fades early Asian session bounce off two-week low.
• UK PM Johnson braces for tough week as Tories voice dislike over ‘Partygate’.
• British covid cases ease but death toll rise, Welsh ports see 30% reduction in traffic due to Brexit.
• UK/US preliminary PMIs for January will direct intraday moves, Fed is the key.

GBP/USD struggles to keep corrective pullback from the 100-DMA, seesaws around 1.3550 heading into Monday’s London open.

In doing so, the cable pair fails to justify the US dollar strength ahead of the key preliminary PMI numbers for January for the UK and the US. Other than the pre-PMI cautious, the pair’s indecision could also be linked to the market’s fears of hawkish Fed during Wednesday’s Federal Open Market Committee (FOMC) meeting.

Additionally, UK PM Boris Johnson is in a political grind amid investigations over holding a booze party during the peak covid lockdowns in Britain. “Johnson would face a confidence vote on his leadership if 54 Tory MPs, or 15% of the total in the House of Commons, submit letters to a key committee calling for him to resign,” said Bloomberg in this regard.

Elsewhere, The Guardian conveyed British citizens’ hardships in the Eurozone as “Thousands of people say their rights have been compromised despite government promises.” It’s worth noting that Independent said, “Two major ports in Wales saw trade plummet by 30 percent in 2021 as a result of post-Brexit changes in the way freight is moved, a ferry operator has said.”

Talking about the virus, the UK’s covid cases have been halved in the last two weeks with the latest updates citing Saturday’s daily infections as 76,807, down by 54% from 176,191 cases detected two weeks ago.

On a different page, the US State Department and UK Deputy Prime Minister Dominic Raab both flashed warnings over Russia’s preparations for invading Ukraine, which in turn magnified geopolitical fears and challenge the GBP/USD buyers. Furthermore, Friday’s downbeat UK Retail Sales, which contrasts with the hopes of the hawkish Fed, also exert downside pressure on the cable pair.

Against this backdrop, US 10-year Treasury yields rose 3.6 basis points (bps) to 1.783%, snapping a three-day decline, as traders anticipate hawkish Fed verdict, amid firmer inflation, during this week’s key meeting.

Moving on, GBP/USD traders are likely to keep the latest rebound amid upbeat expectations from the UK’s monthly PMI data. However, a surprise negative will highlight the Fed’s rate hike woes and exert downside pressure to break the 100-DMA key support.

Technical analysis

GBP/USD recovery gains support from the 100-DMA level surrounding 1.3540. However, the pair bulls remain unconvinced until crossing the weekly resistance line, near 1.3620. It’s worth noting that the 21-DMA level surrounding 1.3575 guards the quote’s immediate upside.