GBP/USD: Off daily top above 1.3600, eyes UK CPI, Biden’s inaugural ceremony

• GBP/USD eases from the intraday high amid coronavirus, Brexit concerns.
• Risks also dwindle ahead of the UK inflation data, US President-elect Joe Biden’s White House entry.
• UK PM Johnson warns EU over the extension of Brexit deal ratification, Britain marks highest daily covid deaths.

GBP/USD drops to 1.3637 during Wednesday’s Asian trading. In doing so, the cable reverses intraday gains after recently rising for two consecutive days. Market’s cautious sentiment before Biden’s inauguration ceremony and the UK Consumer Price Index (CPI) could be traced for the latest weakness in the pair prices. Also weighing on the quote could be the coronavirus (COVID-19) and Brexit concerns.

As per The Guardian’s latest update, “Public Health England said a further 1,610 people have died within 28 days of testing positive for Covid-19 - the highest number of UK deaths reported on a single day since the outbreak began.” It should also be noted that Germany’s extended lockdown till February 14 and fears of a vaccine shortage in New York and Canada also weigh on the risks.

Furthermore, the Daily Express came out with the news suggesting UK PM Boris Johnson’s rejection to the hints for the European Union’s (EU) likely request to extend the Brexit deal until April. “Boris Johnson has issued a warning to the EU that the Brexit deal signed between the two sides last month must be ratified by February 28,” the news said. In return, The Telegraph mentions that the bloc’s Finacial Services Commissioner warns that market access to UK firms will only come if Government divulges plans to diverge from EU rules.

Earlier, comments from incoming US Treasury Secretary Janet Yellen, indirectly criticizing China and President Donald Trump’s investment plans, roiled the mood.

Amid these plays, stock futures in the US and the UK remain mildly bid while Asian equities trade mixed by press time.

Moving on, the UK’s inflation data for December becomes the immediate catalyst to watch ahead of the US President-elect Joe Biden’s White House entry. “We look for headline inflation to edge up to 0.6% y/y in December (market forecast 0.5%), in line with the BoE's forecast from the November MPR. We look for underlying details to show core CPI rising to 1.4% y/y (market expectations 1.3%), before likely slipping down to about 1.0% y/y through Q1. That being said, inflation will continue to be difficult to read, given that some sectors still remain largely shut. The BoE will likely be watching labor market developments more closely for clues into future inflationary pressures, rather than current inflation reading,” said TD Securities ahead of the UK CPI data.

Technical analysis

21-day SMA around 1.3590 offers immediate support while the GBP/USD bulls target the monthly top near 1.3710.