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GBP/USD: Modestly flat as markets await UK CPI, politics ahead of the Fed

  • Soft Brexit is likely a hidden key to win the UK PM’s race despite Boris Johnson’s lead.
  • Further rounds of Tory voting, British inflation number can entertain investors before the FOMC dominate trade sentiment.
While receding political uncertainty and absence of dovish comments from BOE’s Carney propelled the GBP/USD pair on Tuesday, traders remain cautious ahead of British CPI, Tory leadership contest and FOMC as the quote clings to 1.2560 heading into the London open on Wednesday.

During the second round of Conservative voting for the UK’s Prime Minister (PM), Boris Johnson strengthened his grip over the position with 126 votes compared to 114 previous counts. However, Dominic Raab had to bid adieu to the race, leaving only 5 runners for the post. There will be another round of voting today (and probably tomorrow) to leave only two members at the end.

Even if Boris Johnson seems packing for No.10, he might have to change his Brexit hardliner image after failing to conquer the rest on BBC’s debate.

Elsewhere, the opposition Labour party leader Jeremy Corbyn against pitched for the second referendum and could also grab the headlines today.

Bank of England (BOE) Governor Mark Carney refrained from being dovish, though respected Brexit uncertainty, while speaking at the ECB Forum in Sintra.

On the economic front, May month inflation numbers from the UK will entertain the Cable traders ahead of the key FOMC meeting.

British consumer price index (CPI) may soften to 2.0% from 2.1% on a yearly basis whereas the US Federal Reserve isn’t expected to alter present monetary policy. Though, what’s important to watch will be how the Chairman Jerome Powell justifies his neutral tone amid increasing calls for a rate cut. Additionally, the Fed’s quarterly economic forecast and dot plot will also garner major attention.

Technical Analysis

Recent low surrounding 1.2500 acts as immediate support holding the key to December 2018 low of 1.2477 and YTD low near 1.2438. Meanwhile, 1.2650/55 area comprising 21-day SMA could restrict the pair’s near-term upside prior to highlighting current month top close to 1.2765.