GBP/USD regains footage above 1.3000 with eyes on UK PMI

• GBP/USD consolidates losses after marking the biggest losses in a year.
• Brexit headlines suggest a rough road for the UK-EU trade talks.
• UK Construction PMI, US Factory Orders could offer intermediate moves amid broad risk reset.

GBP/USD holds onto recovery gains, currently +0.15% to 1.3010, while heading into the London open on Tuesday. The pair recently benefited from the market’s risk reset as well as an absence of any negative catalysts concerning the UK.

On Tuesday, the pair slumped 1.6% over the uncertainty of Brexit deal talks between the UK and the European Union (EU). The reason could be the UK PM Johnson’s firm commitment to keep the British demands on the first hand before agreeing to the EU push over opening up on fishing areas.

Also contributing to the pair’s downside could be the US data as well as statements from the London Mayor Sadiq Khan that portrays the lack of satisfaction from the government’s efforts in taming the terrorist activities. An incident reported by the Guardian that political journalists boycott No 10 briefing after PM's aide tries to ban selected reporters also weighed on the pair.

The latest risk recovery is likely based on the Chinese authorities’ push for placating the traders as well as a show to tame short-selling the previous day. While portraying the same, Asian equities and the US 10-year treasury yield recovery from Monday’s fall. However, the increasing toll of coronavirus contagion keeps the risk on the cards.

Moving on, the final reading of the UK Construction PMI, expected 46.6 versus 44.4, followed by the US Factory Orders for December having the market consensus of +1.1% against -0.7% prior, will be observed on the economic calendar. While markets expect no major surprises in data, risk catalysts could direct near-term GBP/USD pair moves.

Technical Analysis

A three-week-old support line near 1.2980 holds the key to pair’s declines towards 1.2900 round figures while an extended pullback could recall 1.3050 and January 23 highs near 1.3150.