GBP/USD stays defensive around 1.2400 amid banking turbulence, pre-data positioning

• GBP/USD licks its wounds after falling the most in eight days.
• UK’s political crisis, banking fears and lack of hawkish BoE statements prod Cable pair’s corrective bounce.
• Market’s consolidation defends GBP/USD but US Durable Goods Orders, risk catalysts are more important for clear directions.

GBP/USD steadiness around 1.2410-15 heading into Wednesday’s London open as bears take a breather after cheering the biggest daily slump in a week. In doing so, the Cable pair benefits from the market’s consolidation ahead of the US Durable Goods Orders for March.

That said, the major central banks’ attempts to restore market confidence by curtailing the US Dollar operations initiated during the first wave of the banking crisis seemed to have put a floor under the GBP/USD prices of late. “The world's top central banks are cutting the frequency of their dollar liquidity operations with the U.S. Federal Reserve from May, sending the clearest signal yet that last month's financial market volatility is essentially over,” said Reuters.

However, the looming banking crisis, triggered through the First Republic Bank (FRB) joins the fears of US default to check the Cable pair buyers.

On Tuesday, the FRB renewed the woes of banking fallouts by flashing disappointing earnings reports and the executives’ resistance in taking questions, not to forget mentioning the absence of earnings guidance.

On the other hand, US Treasury Secretary Janet Yellen warned that failure by Congress to raise the government's debt ceiling–and the resulting default–would trigger an "economic catastrophe" that would send interest rates higher for years to come, per Reuters.

It’s worth noting that the ethics committee investigation on UK Prime Minister Rishi Sunak and the cautious mood surrounding the Brexit deal with the European Union, as British PM Sunak pushes for easy travel rules, also challenge the GBP/USD pair’s recovery moves.

Elsewhere, a jump in the UK’s borrowing in March that fuelled the British debt-to-GDP ratio reaching 100%, the highest since the 1960s, also weighs on the Cable pair prices. On the same line are the comments from Bank of England (BoE) officials as they hesitate confirming the hawkish bias. Firstly, BoE Deputy Governor, Ben Broadbent, said on Tuesday, “had we seen inflation shocks coming, BoE would have tightened policy sooner.” Following him, BoE Chief Economist Huw Pill said that recent events moderated calls for higher interest rates.

Furthermore, the US statistics have been mixed and contribute to the uncertainty surrounding the Federal Reserve’s (Fed) future moves, which in turn strengthen the market’s downbeat bias, despite the latest cautious optimism. That said, US Conference Board's Consumer Confidence Index edged lower to 101.3 for April, versus 104.0 prior. Additional details of the publication stated that the Present Situation Index ticked up to 151.1 during the said month from 148.9 prior whereas the Consumer Expectations Index dropped to 68.1 from 74 previous readings. Further, the one-year consumer inflation expectations eased to 6.2% in April from 6.3% in March.

Moving ahead, the US Durable Goods Orders for March, expected to improve to 0.8% versus -1.0% prior, will be important for the Cable pair traders to watch amid a light calendar in the UK. However, risk catalysts will be more important for a clear guide.

Technical analysis

Although a three-week-old ascending support line joins the 21-day Exponential Moving Average (EMA) to restrict short-term GBP/USD downside around 1.2400-2395, recovery needs validation from the 10-day EMA hurdle of 1.2430 to convince Cable buyers.