GBP/USD Price Tumbling to 1.34 as Fed and UK politics Stir Bears

• For the second consecutive day, GBP/USD falls as the new low is updated.
• A crazy Brexit deal and delays in Brexit negotiations over Northern Ireland will lead to the EU suing Britain.
• Sue Gray’s report is expected as British Prime Minister Johnson defends a booze party while evacuating animals from Afghanistan is compounding problems.
• The Fed echoed dovish market forecasts, but US fourth-quarter GDP is still unclear.

Yesterday’s downward trend in the GBP/USD price was due to a sharp rise in the US dollar following Fed events and worsening Brexit and UK political conditions. To refresh daily lows ahead of Thursday’s London open, the cable pair falls to 1.3430, down 0.20% on the day.

At Wednesday’s Federal Open Market Committee (FOMC) meeting, the Federal Reserve (Fed) kept interest rates and interest rate cut targets on hold, meeting market expectations. However, the most interesting part of the monetary policy statement was this: “The Committee expects that it will soon be appropriate to raise the federal funds rate.”

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British Prime Minister Boris Johnson breathed a sigh of relief on Wednesday when Sue Gray’s report was halted, though not for long. According to Sky News, when asked whether Mr. Johnson should resign if police interrogated him in a biased manner, he replied: ‘No, of course, it won’t be a question of resignation because of the innocent until proven guilty principle.’

The Sun reports that Brussels will sue the UK over the wild wind farm row to breach the Brexit deal. The Democratic Unionist Party (DUP) leader Sir Geoffrey Donaldson has been exerting increasing pressure on Britain’s Brexit Secretary Liz Truss to break the Northern Ireland Protocol’s deadlock (NI) deadlock.

The recent hawkish data out of the UK and the easing of restrictions on Coronavirus-related activities have given GBP/USD bears an uphill battle of late.

Nevertheless, risk aversion supports the demand for the US dollar. As a result, stock futures and US Treasury yields rose by more than 1%.

A key report on British Prime Minister Johnson’s future affects GBP/USD’s short-term movements. In addition, the US Q4 GDP and durable goods orders for December are also on the watch list.

GBP/USD price technical analysis: Bears eying 1.3400

The GBP/USD price remains well below the key SMAs on the 4-hour chart. Moreover, the crossover of 20 and 200 SMAs exert pressure on the pound. The average daily range for the pair lies at 48% ahead of the London session, which indicates higher volatility.

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The previous interim support of 1.3435 is broken, and the pair now eyes at 1.3400 ahead of 1.3350. Alternatively, bears may halt around the current levels and attempt to recover towards 1.3500 ahead of 1.3550. However, the volume data shows bearish bias as the widespread down bar has a very high volume.