GBP/USD breaks 1.38

The Pound against the U.S. Dollar broke 1.38, a critical psychological support/resistance level that gives bulls confidence to attack the 1.40 level.

GBP/USD Trading Comfortably Above 1.38

GBP/USD Looking For Positive Vaccine Results

The recent tailwind in the Pound has mainly come from the number of initial doses the U.K. has distributed amongst its citizens. More than 10 million people in the U.K. have received at least one dose of the Coronavirus vaccine, prioritizing the elderly and frontline workers.

However, initial optimism will not last long. Further pushes higher in the pair will long-lasting positive effects from the vaccinations and the lockdowns, with a Reuters poll finding that many analysts believe it’ll take more than two years for Britain’s economy to recover to its pre-Coronavirus levels.

James Smith at ING stated that “While we expect strict lockdowns to trigger a 3% fall in U.K. GDP in the first quarter, the more optimistic outlook for vaccinations means a sustained recovery could start in the spring”. Furthermore, Mimi Rushton, co-head of global F.X. sales at Barclays, stated that “The reative outperformance of the U.K. in rolling out the vaccination program has definitely helped buoy expectations for an accelerated recovery.”

Analysts will be looking at GDP figures coming out later this Friday, with analysts predicting a 0.5% in GDP Growth.

GBP/USD Strengthened By Broad U.S Dollar Weakness

However, the strength of the pair also comes from the recent weakness of the U.S. Dollar. As risk-on takes over in many asset markets, the continuation of the Federal Reserves’ $120 Billion scheme and inflation concerns continue, long term tailwinds continue to pressure the U.S. Dollar. However, many analysts are reconsidering their predictions of a weaker dollar on the possibility of a better than expected U.S. recovery and the Fed backpedaling on their extraordinary measures.

George Saravelos, head of currency research at Deutsche Bank in London, stated that “Having been vocal dollar bears last year we argue it is time for a consolidation in the dollar lower trend and would take profit on [negative dollar bets against the euro].”