GBP/USD Weighed by Tariff Talks and Coronavirus Worries

GBP/USD turned lower yesterday to wipe out over half of its gain for the week and is seen hovering near its 50-day moving average in early trading on Thursday.

The pair pared gains after news that the US is considering implementing tariffs on certain imports from the UK and some parts of Europe. Duties could be as high as 100% of the product value and discussions on whether to move forward will take place until July 26.

Further weighing on GBP/USD was a recovery in the greenback. The US dollar index (DXY) pushed higher yesterday as equities declined on worries over increasing Coronavirus cases.

The S&P 500 (SPY) declined 2.55% to fall into negative territory for the week. In a typical risk-off fashion, gold prices rallied and briefly touched a fresh seven and a half year high.

There are several economic data releases scheduled for later in the day. The ones that stand out are GDP data from the US and the weekly US unemployment claims report. Analysts expect GDP to decline an annualized 5% in the first quarter of the year. The estimate for unemployment claims is for 1.3 million new people filing for benefits.

Technical Analysis

GBP/USD is trading between its 20 and 50-day moving average and a break of either indicator could set the near-term tone.

Resistance in the session ahead is found at 1.2510 as the level held the pair higher on a daily close basis early last week.

If the pair manages to gain downward momentum, support is seen at 1.2290 which is a level that previously held the pair higher in the middle of April.

While GBP/USD is in a clear downtrend from the peak posted on June 10, the US dollar index (DXY) has been trading sideways since the start of the month.

The recent highs near 97.65 in DXY will be closely watched. An upward break above it would signal a bullish range break.

Bottom Line

• GBP/USD is weighed by risk-off sentiment and threats of tariffs from the US.
• US GDP data, weekly unemployment claims, and durable goods orders will be released later in the session.

For a look at all of today’s economic events, check out our economic calendar.