- GBP/USD is trading on lower ground as the UK enters a strict lockdown.
- Hopes about an accelerated vaccine campaign and Georgia's elections may boost cable.
- Tuesday's four-hour chart is painting a bullish picture.
No more tiers – the whole of the UK has entered a severe lockdown reminiscent of the spring, which includes the shuttering of schools. Prime Minister Boris Johnson asked the nation to stay at home as hospitals are overwhelmed by the rapid spread of COVID-19.
There is growing evidence that the B.1.1.7 virus strain is responsible for the accelerated spread, also prompting many countries to ban travel to and from the UK. To add insult to injury, some worry that the South African variant could even be resistant to vaccines. Further information is needed.
GBP/USD dropped sharply ahead of Johnson's announcement and seems to have stabilized afterward. One reason for the recovery is that the Chancellor of the Exchequer Rishi Sunak was quick to announce additional support to businesses, worth some £4.6 billion.
Another reason may be the trigger to exit the current restrictions. The presumed end-date is mid-February but the move leans on the vaccination campaign more than the disease developments. Johnson is trying to ramp up the relatively slow immunization campaign.
While Britain easily leads European countries, only some 1.4% have received the jabs so far. That could change now with Johnson's emphasis on vaccines and the deployment of the homegrown University of Oxford/AstraZeneca inoculations.
Despite a somewhat lower efficacy rate than that of the Pfizer/BioNTech jab, AstraZeneca's doses require only normal refrigeration and are produced at a rapid pace. The government aims to administer vaccines at a pace of two million per week. These aspirations – even if unachieved – can boost sterling.
GBP/USD is also rising on hopes that Democrats win both runoff races in Georgia. Recent opinion polls from the Peach State have shown that President-elect Joe Biden's candidates have picked some steam in the run-up to the vote. If these surveys – which proved accurate in Georgia – turn into reality, Democrats would have effective control of the Senate.
On the other hand, Republican candidates received more support in the first round of votes in November, outperforming President Donald Trump who lost the state. The Commander-in-Chief has continued peddling conspiracy theories and aims to overturn his defeat. Tensions toward Congress' ratification session on Wednesday have also weighed on markets, but are set to prove futile.
Covid and politics are set to dominate trading, but one data point stands out on Tuesday – the ISM MAnufacturing Purchasing Managers' Index for December. An upbeat figure is likely as the industrial sector suffered less than the services one.
GBP/USD Technical Analysis
Pound/dollar continues benefiting from upside momentum on the four-hour chart despite the recent setback. It held above the 50 Simple Moving Average in another sign of strength and the Relative Strength Index dropped away from the 70 level – exiting overbought conditions.
All in all, bulls are in control.
Some resistance awaits at 1.3610, the daily high, followed by 1.3703, the 2021 peak. Further above, 1.3730 and 1.3810 await GBP/USD.
Support awaits at 1.3555, the daily low, followed by 1.3480 and 1.3440.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.