GBP / USD in the hands of US President Biden around the G7 / Irish border
- GBP / USD is trapped sideways in the consolidation of weekly gains.
- The Irish border will be the focus of the week’s concerns as Us Pres Biden and UK Prime Minister Johnson plan to meet ahead of the G7.
GBP / USD is under pressure on Tuesday, falling 0.18% at time of writing to 1.4150 from a high of 1.4184 to a low of 1.4120.
The pound is in a phase of consolidation and flows pass through the US dollar, the market’s attention being divided between the reopening of the British economy and the US Federal Reserve.
Cable hovered in consolidation and side channel in the $ 1.41 to $ 1.42 range.
The pound has benefited in recent weeks as investors back the UK on speculation that the economy will reopen faster thanks to its vaccination program.
In fact, the pound has been one of the best performing G10 currencies against the dollar this year, only lagging behind the commodity-driven Canadian dollar.
However, we saw a slight attempt to recover the greenback which appreciated 1% in June as far as measured against a basket of currencies in the DXY index.
Strong incoming economic data in the United States propelled the US dollar forward on expectations of a possible Federal Reserve tightening.
In addition, the British pound has come under pressure as hopes of an imminent reopening of the UK economy have faded.
Hopes of reopening had faded somewhat in recent weeks due to the increase in cases of the Delta variant of COVID-19 first detected in India.
Health Minister Matt Hancock said on Sunday it was too early to say whether the June 21 plan could go forward.
“Such speculation has already produced a warning from the hospitality industry about the potential for non-survival for many other companies,” said analysts at Rabobank.
“Although UK consumer confidence has been optimistic in recent weeks, the rebound is likely to be hampered by either a delay in lifting restrictions or an increase in Covid cases.”
In other recent data released on Tuesday, UK retailers reported a sharp increase in sales in May, after lockdowns ended and a further easing of COVID restrictions on hospitality drew more shoppers to shopping malls. cities.
The British Retail Consortium said total sales for its members, which include supermarkets and chain stores, were 10.0% higher last month than in May two years ago.
Meanwhile, tensions between the UK and the EU over the implementation of the Northern Ireland Protocol will be at the heart of the week (or perhaps weeks to come) as the issues surrounding its implementation. work will be a topic of discussion between US President Job Biden and Prime Minister Boris Johnson ahead of the G7 summit in Cornwall starting June 11.
“There is speculation in the press that Biden could again tell Johnson that a UK-US trade deal could be in jeopardy if the protocol is not implemented by the UK. Uni, ”Rabobank analysts explained.
“The British press speculates that the EU could be on the verge of a trade war with the UK if the Johnson government unilaterally extends the grace period of the Northern Ireland Protocol. More generally, it is possible that any involvement de Biden this week raises awareness of the difficulties the UK is facing not only with the protocol but also with other post-Brexit trade negotiations.
When it comes to positioning, the overall positioning on the British pound remains net long, which means that the market overall is betting for it to make gains. However, that could come undone if the trade tensions attract the attention of the media and financial markets.
“A year ago, the British government hoped that a US-UK trade deal would be a quick success for Brexit. Those hopes faded when Trump left the White House, ”Rabobank analysts argued.