GBP/USD eases below 1.3700 amid Brexit chatters, eyes UK Services PMI

• GBP/USD trims recovery gains from lowest since January 26.
• Britain kick-starts post-Brexit state aid planning, UK’s Gove asks extension of Brexit grace period.
• Northern Ireland borders and British business’ worries join stimulus hopes.
• Final reading of UK Services PMI for January, US data will offer fresh directives.

GBP/USD fades corrective pullback from one-week low, while easing to 1.3664, ahead of Wednesday’s London open. The quote dropped to a multi-day low the previous day amid broad US dollar strength and talks of Brexit. Though, market optimism concerning the UK’s aid plan and US stimulus favored the quote bounce before cautious sentiment ahead of the key British Services PMI probe the buyers.

Be it Northern Ireland’s port checks or woes of British Cheer and fishing companies, Brexit woes regained market attention as the UK witnesses a reduction in the coronavirus (COVID-19) problems. This becomes the reason for the BBC news stating, “Cabinet Office Minister Michael Gove has called for grace periods to be extended, to allow businesses more time to adapt to new Irish Sea border processes.”

Further, British policymakers are up for putting the first step towards the UK-backed state-aid plans. “Britain wants to establish a more flexible system of subsidy rules than those in place when it was a member of the European Union, business minister Kwasi Kwarteng said on Wednesday,” mentioned Reuters. It’s worth mentioning that fears of South African covid strain and UK PM Boris Johnson’s visit to the Scottish lab were also in the spotlight off-late.

Elsewhere, the US policymakers are also haggling with the much-awaited stimulus whereas vaccine news is good to help the risk-tone amid positive trading in Asia.

Against his backdrop, stock futures in the US and the UK remain positive while the US 10-year Treasury yields also follow suit around 1.10% by press time.

Looking forward, the UK’s likely confirmation of January’s initial 38.8 figures may exert additional downside pressure on the quote. However, any surprises could join the latest pullback in US dollars to recall the buyers.

Following that, the US ADP Employment Change and ISM Services PMI for the previous month will be the key to watch. It should be noted that risk catalysts keep the driver’s seat ahead of Friday’s US NFP.

Technical analysis

Unless rising back beyond the previous support line from January 11, at 1.3685 now, GBP/USD is less likely to avoid revisiting the 50-day SMA level of 1.3535.