GBP/USD awaits BOE, post-Brexit trade talks amid broad risk-off

• GBP/USD struggles for direction amid a lack of major catalysts.
• China’s coronavirus, fears of hard Brexit weigh on the pair.
• Recently positive data indicate a hawkish statement and intermediate strength.

GBP/USD remains modestly flat near 1.3060 while heading into the London open on Tuesday. In doing so, the pair snaps the previous three-day declines. While the uncertainty surrounding the post-Brexit trade deal between the European Union (EU) and the UK recently weighed on the pair, the US dollar’s broad strength amid risk-off also dragged the quote down. The present pullback could be attributed to the risk reset amid a lack of major catalysts as well as ahead of the key events like BOE and Brexit talks.

Latest on the Brexit suggests that the EU’s top Brexit negotiator Michel Barnier turned down the UK Boris Johnson’s claims over no checks at the Northern Irish borders. Further, the Irish Taoiseach Leo Varadkar said that the EU will have an upper hand in Brexit talks that could miss the deadline but the UK leader “respectfully” disagreed.

Over the economic front, the latest data from Britain have helped cut the odds of the BOE’s rate cut, that were previously seen as confirmed due to the Governor’s bearish tone and downbeat figures. According to BOEWATCH, BOE rate cut expectations reached 70% last week, but have since been trimmed, to 59%.

Elsewhere, the market’s risk-tone remains heavy as the fears of China’s coronavirus outbreak spread across the board with the World Health Organization (WHO) terming it as “high” risk following the earlier “moderate” tag. With this, the US 10-year treasury yields seesaw near the early October lows to 1.61% whereas most stocks in Asia are in red despite Chinese markets’ off due to Lunar New Year break.

While Thursday’s BOE will be the first trigger for the GBP/USD, followed by Brexit talks during the early February, traders will also keep eyes on the US data and risk headlines for intermediate direction.

Technical Analysis

Unless breaking a 21-day SMA level of 1.3070, the return of sub-1.3000 area can’t be denied.