GBP/USD bulls take a breather at fortnight top, retreats to 1.1350 with eyes on UK politics

• GBP/USD remains sidelined after refreshing a two-week high.
• UK Chancellor’s dramatic U-turn on “mini-budget” renews market sentiment, propels the Pound.
• Risk-on mood, downbeat US data trigger US dollar pullback amid light calendar.

GBP/USD pares recently gains around a two-week high, easing back to 1.1350 during early Tuesday in Asia after an upbeat start to the week as bulls seek confirmation of the latest optimism surrounding the UK economy.

That said, the Cable pair renewed the multi-day top the previous day after British Finance Minister’s, also called Chancellor, reversal of earlier policy announcement boosted the market’s hope that London will overcome the impending market collapse. “Under the new policy, most of Truss's 45 billion pounds of unfunded tax cuts will go and the two-year energy subsidy scheme for households and businesses - expected to cost well over 100 billion pounds - will now be curtailed in April,” stated Reuters.

Other than the political plays, the Bank of England’s (BOE) readiness for debt buybacks, starting November 07, also adds strength to the GBP/USD.

On the other hand, the US dollar had to bear the burden of the market’s risk-on mood, as well as downbeat US data.

That said, Wall Street closed positive and the yields were mildly bid amid the broad market optimism despite a light calendar on Monday. Talking about the data, NY Empire State Manufacturing Index for October dropped -9.5 versus -4.0 expected and -1.5 prior.

Looking ahead, GBP/USD buyers will need more positives to defend the latest recovery otherwise hawkish Fed bets and recession fears could easily recall the bears.

Technical analysis

Failure to provide a daily close beyond the five-week-old resistance line, around 1.1370 by the press time, favors GBP/USD pullback towards the 21-DMA support, close to 1.1145 at the latest.