The cable pair has been dropped from yesterday itself among the strong US data on mildly upbeat market sentiment. Favoring the consolidation could be the light calendar and mixed concerns over the Federal Reserve’s (Fed) action on Wednesday. PM Boris Johnson wants a wider trade deal with the US and also better access to the country for vaccinated travellers.

The US House Speaker Nancy Pelosi said on Tuesday that she hopes for a $3.5 trillion spending bill but is prepared for any adjustments. The House and Senate are already in agreement on most of the bills. The President and Senate Democrats sent us a budget resolution with a cap of $3.5 trillion.  “I have promised Members that we would not have House Members vote for a bill with a higher topline than would be passed by the Senate.  Hopefully, that will be at the $3.5 trillion number.  We must be prepared for adjustments according to the Byrd rule and an agreed to number. This week, we must take decisive action on proceeding with the Build Back Better reconciliation legislation.” With Nancy compromising speech has impressed the greenback.

UK Prime Minister Boris Johnson urged leaders of the world’s major economies including the United States to deliver on their commitments toward a US$100 billion per year climate fund with less than six weeks to go before a UN climate summit. Johnson and UN Secretary-General António Guterres hosted a roundtable of world leaders on Monday to address major gaps on emissions targets and climate finance.  Johnson told reporters that he is hopeful that the United States can deliver on a promise to step up its share of money toward the US$100 billion annual goal but “we’ve been here before” and “we’re not counting our chickens.”

On the other hand a speech is that ‘New winter of discontent could be hard to avoid’. Boris Johnson recently announced a “plan B” with more restrictions, nothing was ruled out and masks and remote working were mentioned as possibilities. This potentially means more economic disruption. A number of other economic problems have emerged during the recovery.  Brexit has made the whole situation worse because a lot of workers in the food supply chain came from the continent and are no longer allowed to work in the UK.

The government’s idea that British workers will rush to fill the gap is misplaced there are certain problems with low-paid jobs with long and irregular hours. Lots of pubs and restaurants are struggling to stay open either because they can’t find enough workers or because of supply shortages. The price and wage increases are producing higher inflation data. Whether this is temporary depends on people’s expectations. If people begin to expect more rises, like they did in the 1970s, it will change their behavior. Firms will raise prices and more workers will want higher wages, causing an inflation spiral.

To keep the economy buoyant in recent years, the Bank of England has cut interest rates to record lows and put huge amounts of money into the economy in the form of quantitative easing. If it has to change direction because of higher inflation, this could have a big effect on asset prices, ranging from shares to houses, since they have all been bid up by cheap money. Higher interest rates would also have repercussions for the public finances, which Chancellor Rishi Sunak is clearly very worried about already. It would mean that future government debt becomes more expensive, which could put a further squeeze on public spending.

Given the upbeat market sentiment and the US dollar pullback, GBP/USD traders may remain hopeful ahead of UK PM Johnson’s visit to the US. Additionally, the Bank of England (BOE) is also up for conveying the latest monetary policy decision and the Quarterly Inflation Report (QIR) on Thursday.

GBP/USD 4 Hour Chart:

Support: 1.3622 (S1), 1.3585 (S2), 1.3530 (S3).

Resistance: 1.3714 (R1), 1.3770 (R2), 1.3806 (R3).

Amidst this above catalysts US Dollar strong moment and UK worries kept the pair into downtrend. We expect a bearish trend for GBP/USD.