GBP/USD licks its wounds below 1.3700 as Brexit underpins UK energy crisis

• GBP/USD picks up bids during second consecutive day of downside.
• UK PM Johnson to consider using army to overcome petrol crisis, Britain suspends competition laws.
• Brexit results in workforce problems, turkey shortages feared on Christmas.
• Market sentiment improves over US stimulus hopes, covid updates but German elections, US Durable goods orders eyed.

GBP/USD picks up to 1.3675, down 0.08% intraday heading into Monday’s London open. Even as the US dollar pullback, amid broad risk-on mood, underpins the cable pair’s latest rebound, pessimism surrounding Brexit-led challenges, recently over UK petrol supply, keeps the pair sellers hopeful.

The US Dollar Index (DXY) snaps a three-week uptrend with a 0.05% intraday loss, recently easing to 93.20 amid market optimism, also tracking a pullback of the US 10-year Treasury yields from a three-month high.

While tracing the catalysts for market optimism, hopes over the US stimulus and welcome covid headlines from Japan, as well as Australia, could be linked. Also, the China-Canada prisoner swap recently eased the Sino-American tension by allowing Huawei founder’s daughter, also the firm’s Chief Financial Officer (CFO) to go home. It’s worth noting that the absence of Evergrande news and a little silence over the Fed tapering concerns add to the brighter risk appetite.

At home, the rise in the UK’s virus-led death tolls and manpower shortages due to the Brexit weigh on the British pound (GBP). However, the German election hints at a power vacuum in the bloc after Angela Merkel’s 16-year-old reign, which in turn allows the UK to benefit unless someone else, likely France, takes command of the Brexit decisions.

“Business Secretary Kwasi Kwarteng met industry executives on Sunday to try to find a way through supply chain pressures that have led to panic-buying of fuel,” said Sky News. To overcome the energy crisis, UK PM Boris Johnson and his team are up for taking military support. “Ministers to discuss emergency plan Operation Escalin after BP reveals a third of its forecourts have shortages,” said The Guardian.

Although the risk appetite restricts GBP/USD downside, a shift in the sentiment will double-down the quote amid Brexit worries. For that, today’s US Durable Goods Orders for August can also play their role.

Read: US Durable Goods Orders August Preview: Retail Sales have led the way

Technical analysis

Although the early July low surrounding 1.3730 guards the quote’s short-term upside, a two-month-old ascending support line near 1.3630 challenges the GBP/USD sellers.