GBP/USD defends 1.3600 amid hawkish BOE, Brexit jitters

• GBP/USD remains sidelined, struggles to extend recovery moves of late.
• BOE policymakers tease rate hikes but Brexit woes challenge the bulls.
• US jobs report raises concerns over Fed tapering but not much.
• US holidays may restrict market moves, risk catalysts are the key.

GBP/USD trades mixed around 1.3620, keeping a week-long sideways grind amid Monday’s initial Asian session.

In doing so, the cable pair struggles to justify the Bank of England (BOE) policymakers’ optimism and cheer the last Friday’s downbeat US employment data as Brexit fears challenge the buyers during a quiet start to the week.

Although BOE Governor Andrew Bailey failed to provide any clear guide over the British central bank’s next step, his comments like, “Obviously I am concerned with inflation above target,” hint at monetary policy tightening in the future. Following that, BoE policymaker Michael Saunders told households to get ready for "significantly earlier" interest rate rises as inflation pressure mounts in the British economy, the Telegraph newspaper said on Saturday.

It’s worth noting that recently easing covid pressure in the developed world also help the UK central bank’s policymakers to remain hopeful. However, the pandemic effects last longer and hence warrant the BOE to remain cautious, challenging the GBP/USD buyers of late.

Elsewhere, British Brexit Minister David Frost and Ireland’s foreign minister Simon Coveney portrayed Brexit barbs over Twitter. “UK demands on the Northern Ireland (NI) Protocol could cause ‘a breakdown in relations’ with the EU, Ireland's foreign minister has warned, per the BBC. On the other hand, UK’s Frost insists the European Union (EU) NI proposals must go further to resolve the dispute.

On Friday, the US dollar weakened versus major currencies following the downbeat jobs report for September. The headline Nonfarm Payrolls (NFP) disappointed markets with 194K figures, much lower than around 500K expected. It should be noted, however, that the prior reading got an upward revision to 366K. On the same line, the Unemployment Rate dropped to 4.8%, versus 5.1% expected and 5.2% prior, soothing the pains, whereas Average Hourly Earnings also jumped past 0.4% expected and revised down previous readouts of 0.4% to 0.6%.

Although the jobs report questions the Fed tapering plans and the BOE hawks struggle to retake controls, the Brexit fears and a light calendar may question the short-term GBP/USD moves. Also, a partial off in the US trading, with equities running and bond markets closed, probes the pair’s momentum.

Technical analysis

A clear break of the monthly resistance line, now support around 1.3520, keeps GBP/USD buyers hopeful. However, 20-DMA near 1.3635 restricts the immediate upside of the quote.