Forex Market: GBP/USD holds ground near the 1.2400 mark after a choppy month-end session

GBP/USD held on to gains in early European trade on Wednesday ahead of a fresh string of macro data and central bank officials’ statements, scheduled later in the day.

On Tuesday the Sterling bounced from near a one-month low and briefly tested the area near the 1.2400 mark in late US trade, but analysts attributed the move to end-of-quarter portfolio rebalancing rather than to improving risk sentiment.

Since EU-UK negotiations on a new trading relationship have so far not made much of a progress, many analysts believe the risk of a no-deal Brexit at year-end is once again on the table.

Markets also weighed less bearish remarks from US monetary officials and a warning from US top medical expert concerning the virus spread. In a testimony before the House of Representatives Financial Services Committee on Tuesday Treasury Secretary Steven Mnuchin said the government would begin discussing supplemental coronavirus relief legislation that might be passed by the end of July, while Fed Chair Jerome Powell said the central bank could lower the minimum loan threshold under the Main Street lending program in the future.

Meanwhile, in a separate hearing, Dr. Anthony Fauci, who heads the National Institute of Allergy and Infectious Diseases, warned that new COVID-19 infections could rise to 100,000 per day if the observed increase in confirmed cases in many states is not contained. The US reported 47,000 new coronavirus cases on Tuesday, or the sharpest single-day surge since the start of the pandemic.

As of 7:17 GMT on Wednesday GBP/USD was inching down 0.09% to trade at 1.2390, after touching an intraday high of 1.2401 in early Asian session. The major pair has erased earlier losses, being up 0.43% for the week, following three successive weeks of decline.

On today’s economic calendar, at 8:30 GMT IHS Markit/CIPS will release the final data on UK manufacturing activity for June. The respective Purchasing Managers’ Index probably came in at a final 50.1, according to market expectations, which would confirm the preliminary estimate. It has been the first expansion in manufacturing activity in four months, as production volumes increased due to a partial reopening of factories, while new orders continued to decrease.

At 11:00 GMT Bank of England’s Monetary Policy Committee member Jonathan Haskel will speak at an event organized by Brighton Chamber on how the pandemic has affected UK business and the wider economy and how swiftly the country will manage to recover.

A report by Automatic Data Processing Inc at 12:15 GMT may show employers in the US non-farm private sector hired 3.000 million workers in June, as expected by analysts. In May, private businesses fired 2.760 million employees, as 1.967 million jobs were lost in the service-providing sector and 0.794 million jobs – in the goods-producing sector.

Meanwhile, activity in United States’ manufacturing industry probably contracted for a fourth consecutive month in June, with the respective Purchasing Managers’ Index coming in at a reading of 49.5, according to market expectations. In May, the gauge was reported at 43.1. “May appears to be a transition month, as many panelists and their suppliers returned to work late in the month. However, demand remains uncertain, likely impacting inventories, customer inventories, employment, imports and backlog of orders. Among the six biggest industry sectors, Food, Beverage & Tobacco Products remains the only industry in expansion,” Institute for Supply Management Chair Timothy Fiore said. The ISM is to release the official report at 14:00 GMT.

At 14:00 GMT Federal Reserve President for Chicago Charles Evans will moderate a virtual discussion focused on visions for how Chicago recovers from the coronavirus crisis. The event is to bring together government, community, health and business leaders.

And at 18:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on June 9th-10th. The minutes offer detailed insights on the FOMC’s monetary policy stance. High volatility of the currency pairs containing USD is usually present after the publication. On Monday Federal Reserve Chair Jerome Powell said in prepared remarks that the US economy was facing “extraordinary uncertainty”, especially amid ongoing attempts to contain the spread of the novel coronavirus.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 24.9 basis points (0.249%) as of 6:15 GMT on Wednesday, up from 23.9 basis points on June 30th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.2354
R1 – 1.2449
R2 – 1.2498
R3 – 1.2594
R4 – 1.2690

S1 – 1.2305
S2 – 1.2209
S3 – 1.2161
S4 – 1.2113