- The Brexit issue is back on the table and ready to kick into high gear.
- Analysts keen on upcoming German data to help paint a picture of economic recovery.
- EU will not slap China with economic sanctions over Beijing’s new security law.
The bears dominated the GBP/USD exchange rate for the better part of Monday’s trading session, and the same trickled down into Tuesday’s session. The bearish performance indicates that the U.S dollar gained some ground against the Pound despite the U.S reporting an $864 billion budget deficit for June. Meanwhile, the UK reported strong gains in the UK retail sector in the same month.
The U.S dollar enjoys safe-haven status, especially when other major currencies are going through economic turmoil. This was the case a few months ago during the coronavirus lockdown. However, the economic reopening allowed other currencies such as the Pound Sterling to recover, although those gains might be cut short by the resurgence of Brexit talks.
The GBP/USD exchange rate was off to a weak bearish performance on Tuesday morning. Technical analysts expected the price to trade short below 1.2563 with price targets at 1.2543, 1.2487 and 1.2451.
The Brexit issue has previously affected the GBP’s performance. May and June were characterized by the GBP’s recovery from the coronavirus’s economic downfall in March and April. However, the Brexit talks present further uncertainty that may prevent the currency from taking advantage of the recovery opportunities.
The GBP may gain some buoyancy from vital data released this week
We have already seen some favorable retail data from June that has been vital in supporting the GBP’s performance. It might enjoy further support if the data to be launched this week is positive. This includes manufacturing data and monthly GDP data. Meanwhile, the U.S is expected to release Core CPI data. This means that the GBP might experience some friction with its attempts to gain some ground against the U.S dollar, especially with the Brexit issue weighing down on the UK economy.
The upcoming data is expected to influence investor decisions heavily and, thus, dictate the direction of the GBP/USD currency pair. This is why investors are keen to have a clearer picture of how the two economies have fared since lockdown measures were eased.