GBP/USD faces rejection at 1.37 amid Brexit, covid concerns

• GBP/USD recedes from fresh 32-month high amid US dollar’s corrective pullback.
• Cracks in Brexit deal, fears of third national lockdown probe cable buyers.
• Oxford begins AstraZeneca vaccinations, government emergency meeting eyed.
• US-China tussle, Brexit and second readings of December’s activity numbers also in the spotlight.

GBP/USD trims early Asian gains that refreshed multi-month top to 1.3698, before currently declining to 1.3680, up 0.10% intraday, while heading into the London open on Monday. While the US dollar weakness helped the Cable to the run-up to a fresh high since May 2018 before a few hours, fresh concerns about the coronavirus (COVID-19) and Brexit joins the US dollar’s corrective pullback to portray the latest weakness ahead of December’s PMIs and the UK government’s emergency meeting to weigh a third national lockdown.

While a lack of clarity over the housing documents stopped British ex-pats boarding for Spain, this is likely a starting to the mess which fears amid a rushed Brexit deal.  It should be noted that services, the key to British GDP, may also have a bumpy road during the ex-EU era and will create noises especially when UK PM Boris Johnson aims for “global Britain,” as the Financial Times puts it.

On the other hand, UK PM Johnson and the company weighs Tier-4 activity restrictions and/or third national lockdown amid a jump in the covid numbers. “It comes as the Government faces criticism over its decision to keep schools closed over the first weeks of January and the UK saw an additional 454 die from the virus on Sunday,” said The Sun.

While British citizen’s eagerly awaited today’s start of AstraZeneca vaccinations chatters, over the UK’s National Health Services’ (NHS) commitment on delivering two million COVID-19 jabs a week sour the mood.

Alike the UK, Japan is also weighing emergency while the US policymakers recently re-election Nancy Pelosi as their House Speaker. Although, the same should have helped the risks, amid concerns of further easy money, the Sino-American tension due to the New York Stock Exchange’s delisting of Chinese scripts weigh on the mood.

Against this backdrop, S&P 500 Futures wobble around record top around the mid-3,700s while stocks in Asia-Pacific remain positive amid upbeat PMIs. Further, the US dollar index (DXY) licks its wounds below 90.00, currently down 0.18%.

Looking forward, second readings of December’s Manufacturing PMI from the UK and the US can offer intermediate direction to GBP/USD but major attention will be given to the Brexit and covid headlines. Should the British government announces a third national lockdown, odds of the cable’s south-run can’t be ruled out.

Technical analysis

A one-month-old ascending trend line near 1.3745 lures GBP/USD buyers unless the quote drops below September 2020 high near 1.3480.