GBP/USD rebound aims 1.3700 on softer USD ahead of Fed, UK PM Johnson, BOE eyed too

GBP/USD keeps recovery moves from monthly low, snaps three-day downtrend.
DXY eases despite firmer Treasury yields as market sentiment improves.
UK eases travel norms, terms France as friends.
UK PM Johnson’s UN appearance, China’s Evergrande and Fed will be in focus.

GBP/USD eases from intraday top to 1.3665, still keeping corrective pullback from monthly low ahead of Tuesday’s London open. The cable pair’s latest rebound prints the first positive day in four as the US dollar softens on mildly upbeat market sentiment.

The absence of Chinese traders and US House Speaker Nancy Pelosi’s cautious optimism over $3.5 trillion stimulus, not to forget UK PM Boris Johnson’s comments for France and Britain’s easing of travel normal, risk appetite has many reasons to overcome Evergrande fears. Also favoring the consolidation could be the light calendar and mixed concerns over the Federal Reserve’s (Fed) action on Wednesday.

US House Speaker Pelosi stays hopeful for a $3.5 trillion stimulus despite Joe Manchin’s push to the talks towards 2022. The reason could be linked to the policymaker’s readiness to ease stand over the Republican demands.

The global push towards clean energy, mainly by UK PM Boris Johnson, joins US President Joe Biden’s promotion to the United Nations (UN) partnership to underpin the latest cautious optimism. On the same line were chatters relating to the US debt limit extension and recently positive US housing data, which in turn challenges the Fed tapering concerns.

Also on the positive side could be comments from the UK’s business secretary Kwasi Kwarteng who rejected warnings about energy shortages. Furthermore, UK PM Johnson’s statements that Britain’s relationship with France is “indestructible” also favor the cross-currency pair to pick up bids of late.

The risk-on mood could be well observed through by S&P 500 Futures’ 0.30% intraday gains, as well as the US 10-year Treasury yields that consolidate the latest losses around 1.31% by the press time. It’s worth observing that the US Dollar Index (DXY) prints 0.03% intraday loss while easing to 93.20, from a monthly high.

Given the upbeat market sentiment and the US dollar pullback, GBP/USD traders may remain hopeful ahead of UK PM Johnson’s visit to the US. However, fears relating to the Fed tapering, China’s reaction to the Evergrande saga and covid woes may challenge the pair buyers.

Additionally, the Bank of England (BOE) is also up for conveying the latest monetary policy decision and the Quarterly Inflation Report (QIR) on Thursday.

Read: Week ahead: Fed meeting and Bank of England take centre stage

Technical analysis

A two-month-old rising support line near 1.3640 challenges GBP/USD downside ahead of August month’s low of 1.3602. Recovery moves, however, need to cross September 09 low around 1.3730 to convince buyers.