GBP/USD edges higher towards 1.4200, crunch Brexit talks before G7 eyed

• GBP/USD cheers US dollar pullback to print mild gains, the third daily upside in four.
• Brexit negotiators from EU, UK meet in London for last ditched efforts to resolve NI protocol issues.
• Confusion over UK’s unlock, inflation battles stimulus hopes amid a quiet session.
• Brexit updates, China-linked news can offer intermediate clues ahead of Thursday’s key G7, US CPI.

GBP/USD eases from the intraday top, up 0.06% on a day around 1.4165, heading into Wednesday’s London open. In doing so, the quote rises for the third day in the last four, except the previous day’s drop, amid broad US dollar weakness. It should, however, be noted that cautious sentiment ahead of today’s key Brexit talks over the Northern Ireland (NI) border issues probe the optimists.

US dollar index (DXY) reverses the previous day’s gains around 90.05, down 0.07% as Treasury yields consolidate recent losses around the monthly low. Also testing the greenback bulls could be the mixed concerns over China and US President Joe Biden’s infrastructure spending. Worries over the Fed’s next move and Thursday’s key US CPI, not to forget the ECB, also favor USD sellers amid a sluggish session.

On the other hand, the lowest covid-led death toll in England and Wales help UK PM Boris Johnson to stay firm on his June 21 deadline for unlock even as the market chatters back a fortnight extension. Further, strong comments from Bank of England’s (BOE) Chief Economist Andy Haldane, relating to the housing market, firm up the calls of tapering and back the GBP/USD bulls in turn.

However, Brexit deadlock over the NI protocol and a less likely solution during today’s meeting between the European Union (EU) Maroš Šefčovič, European Commission Vice President and UK’s David Frost probe the sterling buyers.

As per the latest updates from the BBC, “The UK's Brexit minister Lord Frost has urged the EU to show ‘common sense’ during talks over post-Brexit rules in Northern Ireland.” On the same line, Reuters said, “EU President Ursula von der Leyen has expressed her ‘deep concern’ on the implementation of post Brexit arrangements in a phone call to Boris Johnson.”

On Tuesday, EU’s Šefčovič warned the UK while saying, per Reuters, “Brussels will start a trade war with Britain if Boris Johnson overrides the Brexit treaty so that Northern Irish shops can keep selling British sausages.”

Given the contrasting outlook of the ex-neighbors, today’s Brexit talks are likely not to overcome the deadlock on the key issues, which in turn may weigh on the GBP/USD prices going forward. It’s worth mentioning that US President Joe Biden is up for meddling into the key Brexit subject resolution, which in turn gives another reason for today’s negotiations to fall.

Technical analysis

Although an ascending trend line from April 12, near 1.4110 defends GBP/USD bulls, 1.4210 guards the quote’s short-term upside. It’s worth noting that 1.4190 and 21-day SMA near 1.4145 act as extra filters amid a likely sideways grind.