GBP/USD shys from the 1.30 handle ahad of key US data

• GBP/USD struggles to regain the 1.30 handle as traders await the US data.
• UK and EU negotiations will be a risk from here on.

GBP/USD made a run at 1.3000 overnight but it is struggling to stay above water and has taken a dive back toward the mid pint of the 1.29 handle after falling about 10 pips short of the target. The price is relatively flat in Asia today, trading between 1.2951 and 1.2965.

The main focus will be with the UK and EU trade negotiations where there is an aggressive timeline for this phase of negotiations. Investors are wary of such a short period and the risks are stacked up against the pound as a flare-up could be in the offering between the UK and EU's negotiators. This means that Brexit risks are likely to stage a comeback as a market driver for sterling.

"We expect these tensions to build in the weeks ahead and think these could peak in April," analysts at TD Securities argued.

"We retain a more positive GBP outlook for H2, but cable's near-term prospects argue for a more defensive posture - particularly with the USD currently on a firm footing overall."

US data in focus

Meanwhile, the US docket is going to be key for the rest of this week.  We have a 0.2% core CPI forecast in a poll which is near the recent trend. It is the YoY figure that will be of keen interest and a drop to 2.2% from 2.3% will be a concern and likely weigh on the dollar. The forecast is for a lift to 2.% however.

"For retail sales, as with payrolls, huge swings in unadjusted data make forecasting January especially challenging, but we anticipate a weak 0.0% reading for the key control series after a fairly strong 0.5% rise," analysts at D Securities argued. 

GBP/USD levels