GBP/USD: Benefits from the dollar suffering reach its end
|GBP/USD rise due to dollar weakness may have reached its limits. Yohay Elam, an analyst at FXStreet, sees this point as a potential selling opportunity. What’s more, the UK's issues with coronavirus and international relations may weigh on sterling.
Key quotes
“Hopes for a COVID-19 vaccine are on the rise, with Novavax being the latest pharma firm to present promising results. Another positive development is that talks between Republicans and Democrats are making progress – potentially unleashing more stimulus than previously expected.”
“Market optimism may come to a test shortly, with two significant data releases that provide hints toward Friday's Non-Farm Payrolls report. First, ADP's private-sector labor market figures are projected to show a smaller increase in positions – only around one million – a slower recovery. The second figure is a forward-looking one – the ISM Non-Manufacturing Purchasing Managers' Index. Investors will likely shrug off an upbeat headline figure and focus on the employment component. Is America still hiring? The parallel figure for the smaller manufacturing sector fell short of estimates.”
“In the UK, the recent increase in coronavirus cases is worrying – and the government is coming under increased scrutiny. Ministers are on the defensive while the unsettling situation potentially resulting in another lockdown of London – could limit new action. Moreover, there is no news on the international front, like Brexit, US-UK trade talks, and relations with China have yet to improve.”
“The next significant event is the BoE's rate decision due early on Thursday. While the ‘Old Lady’ is set to leave rates unchanged, hints about QE – pound-positive – and negative rates will be closely watching.”
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