GBP/USD: Modestly flat above 1.3000 ahead of BOE
- GBP/USD traders keenly await the BOE decision amid mixed feelings and data.
- Concerns surrounding Brexit, China’s coronavirus and Huawei keep the risks high.
- Expectations of positive surprise, based on the latest data, limit the upside.
GBP/USD remains flat on a daily basis, at 1.3015, while heading into the London open on Thursday. Even if the latest risk-off is weighing on the pair, traders are cautious ahead of the key BOE that has been waited for long.
With the European Union (EU) finally signing the Brexit bill, the regional leaders are preparing for what to do next. The Telegraph said that the UK PM Boris Johnson will be ready to forgo free movement of goods between Britain and Northern Ireland to keep up his promise of the free UK. It was also mentioned that the European leaders will also use tactics to keep up the pressure during the post-Brexit trade talks. As per the news, the talks will have to make concessions over our fishing rights for access to EU financial markets and that the EU judge should have the final say over any trade disputes with Britain.
Elsewhere, the US is exerting pressure on the UK policymakers to rethink their plans to allow China’s Huawei the key position in the country’s 5G network developments.
On the other hand, China’s coronavirus regains market attention as the death toll reaches 170 and forecasts spread that the dragon nation will refresh 20-year low due to the epidemic. Also contributing to the market’s risk-off could the US-China trade tension as the White House has recently denied helping China over tariffs even if coronavirus weighs on its GDP.
With this, the US 10-year treasury yields drop the fresh lows since October 09, 2019, whereas stocks in Asia keep the losses.
Looking forward, the BOE bears 50/50 chances of announcing a rate cut. “The central bank is expected to keep rates on hold, although at least one more MPC is expected to vote in favor of a rate cut. However, there’s a good chance than more than one policymaker adding his voice to the current 2 members in favor of a cut. Governor Carney’s speech will be closely scrutinized afterward. Anyway, things don’t look good for the Pound, with Brexit scheduled for Friday,” says FXStreet’s Chief Analyst Valeria Bednarik.
Following that, the preliminary reading of US Q4 GDP will be in the spotlight. The growth rate of the world’s largest economy is likely to stabilize around 2.1%. However, the latest Fed meeting cited downside risk and suggested to stay prepared for surprises.
Technical Analysis
A multi-week-old support line near 1.2980 and 21-day SMA, at 1.3070 now, becomes the key levels for the pair traders to watch.