Title : GBP/USD: Mildly offered around 1.2050 amid Covid-led risk aversion, challenges to UK economy

November 28 , 2022 12:01 AM ET

By:AnalysisWatch

GBP/USD bears attacked key short-term support around 1.2050 during the second weak performance ahead of Monday's London open. In the process, the Cable pair struggles to cheer economic hopes amid fears of major strikes in the UK as well as Covid woes in China.

"The U.K. government intends to make £1 billion ($1.2 billion) in public funding available for home insulation projects from early next year, widening access to help previously available only to poorer households."

On the other hand, fears of coronavirus are escalating in light of record daily infection numbers from China and protests against the government's "zero-covid" policy. According to Internet reports, the reason may be related to the alleged fire in Shanghai that killed about 10 people because they could not leave the building because it was partially locked. "Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests against China's strict COVID restrictions spread to several cities," the report said, also citing China's National Health Commission: "China reported a fifth consecutive daily record of 40,347 new COVID-19 infections on Nov. 27, of which 3,822 were symptomatic and 36,525 asymptomatic."

UK Transport Minister Mark Harper said Sunday that public sector pay is failing to keep pace with rising inflation as the country faces a wave of industrial action. News reports also said, "Industrial action is becoming more frequent across the U.K.'s transport network, and last week the U.K.'s Royal College of Nursing union announced dates for the first strike by its members in more than 100 years."

Last week, key U.K. economic data for November showed a weak performance, leaving the Bank of England (BOE) struggling to find a clear direction, although hawks expect further rate hikes.

Against this backdrop, S&P 500 futures slipped half a percent, while 10-year U.S. Treasury yields fell five basis points to 3.65% by press time.

Looking ahead, risk catalysts could entertain GBP/USD traders ahead of a speech by Federal Reserve (Fed) Chairman Jerome Powell and November U.S. jobs data, due for release on Thursday and Friday, respectively.

A daily close below a two-week-old ascending support line, which stood at 1.2030 at press time, seems necessary for GBP/USD bears to take control. Until then, buyers targeting the August monthly high at 1.2300 could hold the reins.