GBP/USD in a bearish consolidation phase near 1.2870, focus on Brexit, UK jobs

• Weighed down by a lack of progress on Irish backstop and broad-based USD strength.
• But hopes of Article 50 extension, softer Brexit keeps the GBP supported.
• Focus on options for Brexit - plan B and UK jobs for fresh direction.

The GBP/USD pair extended Friday’s corrective slide into Monday’s Asian trading and hit fresh two-day lows of 1.2848, before entering a phase of downside consolidation near 1.2870 region.

The pound faced fresh selling pressure in early traders, as the Asian desks reacted negatively to the renewed jitters over Brexit after the latest reports suggested that the UK PM May and the Cabinet made no further progress on the Irish backstop over the weekend, with the focus now shifting to May’s Plan B to be announced on Monday. PM May is likely to announce amendments to the Good Friday agreement later today, in a bid to steer Britain out of the EU with a deal.

Kathy Lien at BK Asset Management noted: “Taking a look at the options for plan B, May really has no choice but to ask the EU for more time, which is why by Monday, Article 50 should be extended. May will need to decide what course to take in the coming months - either a Norway style model or a permanent customs union or relent to a second referendum - all of which should be positive for GBP.”

Meanwhile, the US dollar remains broadly bid near two-week tops after the 10-year Treasury yields rallied to three-week tops on Friday amid risk-on action in equities, in the wake of the US-China trade optimism. However, the US government shutdown could start affecting the US economy, which could keep the upside in the greenback limited.

Calendar-wise, the UK docket remains data-empty while the US markets remain closed in observance of Martin Luther King Jr. Day. Hence, the Cable will remain at the mercy of the Brexit-related headlines and the broader market sentiment, as attention turns towards the UK labor market report due tomorrow at 0930 GMT.

GBP/USD Technical Levels