After rejection from the 1.2975 local highs last week, GBPUSD remains on the defensive, now threatening the 1.28 figure. The uncertainty on the US-China preliminary trade deal coupled with stronger dollar are capping the bullish attempts in the pound early on Thursday. At the same time, recent reports that China commerce ministry is ready to negotiate on how much tariffs can be cancelled will ease the downside pressure on high-yielding assets including sterling.
Also, traders are getting more cautious ahead of the so-called Bank of England’s “Super Thursday”. The central bank is widely expected to leave rates on hold, with traders wondering if the monetary authorities drop its hawkish bias. In this context, the focus will be on the quarterly inflation forecast and Mark Carney’s tone. Despite the threat of a no-deal Brexit has abated, the regulator could express concerns amid low inflation and risks for the economy.
Should the bank of England abandon its hawkish bias, the GBPUSD pair could accelerate the decline and get back below the 1.28 handle, with the initial bearish target coming at 1.2785. the key support lies around the 200-DMA which lies around the 1.27 handle. However, the potential selling pressure could be limited as the central bank is unlikely to strike an explicit dovish tone.