GBP/USD flirts with 1.3600 amid Brexit, political jitters, BOE MPR Hearings eyed

• GBP/USD keeps the bounce off monthly support to print mild intraday gains.
• Brexit talks to continue on a more regular basis, NI, post-Brexit tests got recent attention.
• UK leads in levying extra sanctions on Russia but PM Johnson is under pressure to do more.
• MPR will be key as BOE’s Ramsden sounds hawkish while CME’s BOEWatch tool expects 0.30% rate-hike in March.

GBP/USD struggles to defend the previous day’s bounce off monthly support line, approaching 1.3600 during early Wednesday morning in Asia.

The cable pair dropped to the lowest in a week the previous day as the US Dollar cheered safe-haven demand amid ongoing Russia-Ukraine tussles. However, hawkish comments from Bank of England (BoE) Deputy Governor Dave Ramsden joined an absence of major negatives on the Brexit front to trigger the quote’s latest bounce. Also underpinning the corrective pullback is the absence of Russian reactions to the West’s punitive measures and slightly softer comments from US President Joe Biden while announcing US sanctions on Moscow.

BOE’s Ramsden said on Tuesday that the UK economy has so far proved resilient, notwithstanding the scarring effects of COVID and Brexit, as reported by Reuters. "In the near term, some further tightening seems likely to be needed, to prevent current high inflation becoming embedded in wage and price settings," adds BOE’s Ramsden per Reuters.

Elsewhere, Foreign Secretary Liz Truss and European Commission Vice-President Maroš Šefčovič agreed to meet regularly and discuss any points raised by the EU or the UK after the latest Brexit talks, per the BBC. “Asked if the UK would trigger Article 16, which allows either side to unilaterally decide whether to stop implementing parts of the trade deal, Mrs. Truss said that she wanted to improve the situation through talks,” the news also mentioned. Alternatively, the Independent came out with the update suggesting the British criticism of the EU’s push for goods’ quality check. The news said, “Plans to force UK firms to put their goods through costly post-Brexit tests before they can go on sale have been plunged into confusion by a cabinet split.”

On the other hand, the UK was the first to levy, actually marking extra sanctions, on Russia due to the latest aggression towards Ukrainian borders. The US, Canada and European Union also followed the suit while the White House ruled out the scope of a summit between US President Joe Biden and his Russian counterpart Vladimir Putin. On the same line were comments from US Secretary of State Antony Blinken’s rejection of the need for Thursday’s meeting with Russian Foreign Minister Sergei Lavrov.

However, US President Biden’s comments like, “We have no intention of fighting Russia,” seem to have played the role of turning down the fears of a full-fledged war between the West and Moscow. Additionally, comments from Japan’s Prime Minister (PM) Fumio Kishida, calling on Russia to return to diplomatic means, also allow bears to take a breather.

Against this backdrop, S&P 500 Futures consolidate recent losses with 0.5% intraday gains while the US Treasury yields remain inactive at around 1.94%, mainly due to Japan’s holiday, after rising around 2.0% daily in the previous day.

Moving on, the BOE Monetary Policy Report (MPR) Hearings are the key event for GBP/USD traders to watch amid hawkish rhetoric from the policymakers and the market’s hopes of further rate hikes. By the press time, CME’s BOEWatch Tool flashes 100% probabilities of a 0.30% rate hike in March.

Technical analysis

GBP/USD remains inside a five-week-old triangle between 1.3635 and 1.3550, with the recent rebound taking clues from bullish MACD signals and firmer RSI to keep buyers hopeful.