GBP/USD Forecast: Roaring as Boris is raring to get back to work, lifting lockdowns key to next move

"Raring to go back to work" – the words of Prime Minister Boris Johnson, who has completed two weeks of recuperation at Chequers following a near-death encounter with COVID-19. In his first appearance outside Downing Street, the PM has expressed satisfaction from the progress in battling the disease but called for staying patient amid the risk of a second wave of infections. While he refused to say when changes will be made, he promised updates in the next few days.

His absence in the past three weeks has left a leadership gap and uncertainty about managing the crisis. Foreign Secretary Dominic Raab, who has been deputizing for the PM, seemed hesitant to present any de-escalation plan and that weighed on the pound. 

Lifting the lockdown tops the PM's intray. The social distancing measures are set to expire on May 7, but Conservative Party donors have reportedly pressured ministers to ease restrictions earlier. The demands come as the number of UK coronavirus cases has stabilized below 5,000 and hospital deaths are trending lower.

Source: WorldInfoMeter

However, it is essential to remember that  UK mortality figures show a gap between losses of life normally seen this season, the number of disease deaths, and the total, suggesting a higher human toll. Moreover, the recent drop to 413 deaths on Saturday may be due to underreporting during the weekend, a phenomenon observed also in other countries. 

Johnson is reportedly reluctant to move fast with reopening the economy amid these concerns and after coming under scrutiny for mismanaging the crisis in its early days. Any plan will provide a dose of certainty. The lack of sufficient testing and Personal Protective Equipment (PPE) may delay any easing.

The PM will also tackle Brexit. Michel Barnier, the EU's Chief Negotiator – who also recovered from COVID-19 – expressed frustration from Britain's positions on Brexit. The UK left the EU on January 31 but remains in a transition period through year-end. Both sides have until the end of June to discuss an extension, yet Johnson has ruled that out so far. Will the coronavirus crisis change his mind? That may boost the pound. 

The spread of the illness is slowing down also in the US, where several states are gradually easing stay-at-home orders despite warning that testing and contact tracing measures are ready for preventing new outbreaks. Nevertheless, the optimism is boosting sentiment and weighing on the safe-haven dollar. President Donald Trump has skipped public briefings after facing criticism for suggesting injecting disinfectants could cure coronavirus. 

This week's US economic calendar is busy, with the initial estimate of first-quarter Gross Domestic Product and the Federal Reserve's decision standing out. After a heavy dose of monetary stimulus – including enlarging the balance sheet toward $7 trillion – the Fed will likely take a break. Nevertheless, its forecasts are of interest. 

See Fed Preview: Taking a break after two months of madness? Addicted markets may fall, dollar rise

Overall, Johnson's next moves and speculation about the Fed are in the spotlight. 

GBP/USD Technical Analysis

Momentum on the four-hour chart has turned positive and pound/dollar has broken above the 50 and 100 Simple Moving Averages, a positive sign. The Relative Strength Index remains below 70 – outside overbought conditions. All in all, bulls are in control.

Resistance awaits at the daily high of 1.2455, followed by 1.2525, which held cable down last week. The next lines are 1.2575 and 1.2645. 

Support is at 1.2405, which provided support last week and remains a separator of ranges. Further down, 1.23 was a cushion late last week, and it if followed by 1.2250. 

More Reopening: Timing is tough and two assets have more room to rise regardless