GBP/USD losing 0.25% caught in a chop, weighed by solid US data

• GBP/USD is on the backfoot as strong US data and Brexit weigh.
• All eyes turn to tomorrow's US GDP data ahead of the Fed and trade talks. 

GBP/USD has taken a trip to the downside in New York, falling from a high of 1.2617 to a low of 1.2439 on strong U.S. data and hard Brexit fears. 

Upbeat US durable goods orders data reaffirmed expectations that the Fed is unlikely to deliver a 50 bps rate cut at its upcoming meeting on July 30-31, fuelling a bid in the greenback which hit a high of 97.92 in the DXY.

Meanwhile, UK election risks are rising which keeps the outlook for sterling volatile for the months ahead of where a bearish bias persists. The latest comes with U.K. Prime Minister Boris Johnson announcing his key cabinet positions. Most senior positions have gone to ardent Brexiters. The pound can suffer from political uncertainties. An election by the spring is expected but a successful campaign around 31 October would likely lead to an extension of Article 50 which is where the pound could find support. 

However, if Johnson goes for a no-deal Brexit he risks disaster whatever happens, in the opinion of analysts at ING Bank:

"An economic meltdown if he manages to bypass parliamentary opposition and delivers the promised rupture, and a premature general election if Parliament blocks it. If, on the other hand, he genuinely tries to negotiate an orderly withdrawal agreement, Johnson could still deliver a symbolic Brexit by his October deadline, but also secure the transition period that Britain desperately needs."

Meanwhile, the next big event for the pair would be tomorrow's Gross Domestic Product ahead of next week's gathering of Chinese and US negotiators which clashes with the Federal Reserve's interest rate decision. An advance to a near-trend 2.0% q/q saar in Q2, down from a strong 3.1% print in Q1, is expected. "Unlike the prior quarter, we expect consumer spending to be a key engine of growth, rebounding to about 4% after a wobbly start to the year. Business investment, however, continued to slow due to heightened uncertainty while inventories and net exports were likely a drag on growth," analysts at TD Securities explained 

GBP/USD levels

Analysts at Commerzbank explained that GBP/USD is attempting to stabilise very near term, but remains contained by 2-month downtrend at 1.2538 today:

"This maintains an overall neutral to negative bias very near term and we would allow for a retest of the 1.2382 recent low. This may again hold as there is a distinct lack of downside momentum. Below 1.2366 (April 2017 low) we have very little support until the 1.2108, the 78.6% retracement of the entire move up from the 2016 low. What is interesting is that we have a 13 count on the weekly chart, however there remains scope for a further sell-off - TD support lies at 1.2184. Above the downtrend, this would introduce scope top the 55-day ma at 1.2658 and the June high at 1.2784."