• Firm US dollar after the previous day’s surge in U.S. yields, weighs on the GBP/USD.
• The ”Partygate” scandal creates political uncertainty in UK and in turn weighs on the pound.
• Formal talks between US and UK and the Cautious optimism on the UK inflation data favors the Pound.

The Britain Pound seesaws against the US dollar during the Wednesday Asian Session. The Firm US dollar, after the previous day’s surge in U.S. yields and the Political uncertainty in the UK are the major catalysts.

The dollar seems to be boosted by the U.S. Treasury yields which rises further ahead of next week’s Federal Reserve policy meeting at which traders are starting to fear another hawkish surprise.

“A lot of (Fed) officials left us with hawkish impressions right before going quiet (ahead of the meeting),” NatWest markets’ strategist Jan Nevrusi said.

In UK, the focus is on the political uncertainty. The ”Partygate” scandal is the front page news in the UK for some time now and the PM Boris Johnson has denied any wrongdoing. But the public seem to be of different opinion, along with the Conservative party rebels.

The PM Boris Johnson’s presence in the “bring your own booze” garden party while the England was facing first lockdown in May 2020, is throwing his premiership in risk.  Even Some MPs are refusing to accept his claim that he thought it was a “work event”. And this Political uncertainty weighs on the Britain pound.

The FT reported that He will soon face a confidence vote, ”Johnson will attempt to contain the rebellion by announcing a lifting of Covid-19 restrictions in England — a move popular with Tory MPs — but one ally said there was a “50-50 chance.”

UK’s CPI for the December month is due early on Wednesday at 07:00 GMT. With the recently strong employment data, coupled with the cautious optimism at the Bank of England (BOE), today’s inflation numbers will be watched closely by the GBP/USD traders.

BOE Governor Andrew Bailey  is up for a speech after the release of the inflation data and thus adds extra importance to the scheduled economics.

The CPI inflation is expected to a rise of  5.2% YoY versus prior  reading of 5.1% . Talking about the monthly figures, the CPI could ease to 0.5% MoM from 0.7% marked in November.

As per Reuters reports, The US and UK trade teams are expected to announce intent on Wednesday to launch formal talks to resolve trade disputes over steel and aluminium tariffs. This update supports the Pound.

GBP/USD 4 Hour Chart:

Support: 1.3556 (S1), 1.3520 (S2), 1.3468 (S3).

Resistance: 1.3645 (R1), 1.3697 (R2), 1.3733 (R3).

UK’s political uncertainty along with cautious optimism at the Bank of England (BOE), today’s inflation numbers and the Firmer US dollar are the major catalysts underpinning the GBP/USD move. We expect a mix trend for GBP/USD.