GBP/USD Forecast: Sterling may shoot higher on UK military assistance to vaccination campaign

GBP/USD has been struggling as US yields boosted the dollar and markets ignore Capitol storming.
UK PM Johnson is set to boost vaccination campaign with military assistance.
Thursday's four-hour chart is painting a mixed picture.

Yohay Elam FXStreet

"Disgraceful scenes" – UK Prime Minister Boris Johnson has been responding with angst to the historic scenes unfolding in Washington, yet GBP/USD is more influenced by the PM's actions at home.

A well-organized mob incited by President Donald Trump captured the Capitol in pictures unimaginable in the world's strongest democracy. The coup attempt failed to overturn the results– Congress reconvened and certified Joe Biden's victory after security was restored – and it also fell short of moving markets.

Investors may have been glued to the dramatic scenes, but focused on who sits in Congress after the mob was seen off – full Democratic control. Both Democratic candidates Jon Ossof and Raphael Warnock won against Republican incumbents and secured effective control of the upper chamber. That enables Biden to push for more stimulus.

While stocks advanced, the safe-haven dollar did not tumble. Investors sold off bonds in expectation of more debt issuance –and the rise in yields strengthened the greenback, weighing on GBP/USD.

Five factors moving the US dollar in 2021 and not necessarily to the downside

As mentioned earlier, the currency pair is more influenced by UK developments. The PM's announcement of a third lockdown early in the week sent sterling down, and an exit strategy would boost it. Apart from preventing an overwhelming of hospitals, the government also aims to ramp up its vaccination campaign – and not only by adding the AstraZeneca jab.

Johnson has convened a press conference for later on Thursday to discuss the vaccine rollout – which includes Brigadier Phil Prosser. Prioritizing immunization could help the country heal medically and economically. If Johnson sets out ambitious goals, sterling could shine – even though investors know these objectives could be missed.

More Coronavirus: Statistics, herd immunity, vaccine calendar and impact on financial markets and currencies

Markit's UK Construction Purchasing Managers' Index came out at 54.6 points, within expectations. The focus later shifts to the US ISM Services PMI – a hint toward Friday's Nonfarm Payrolls. Weekly jobless claims are also of interest and weak figures in both publications could weigh on the dollar.

GBP/USD Technical Analysis

Pound/dollar is suffering from downside momentum on the four-hour chart but has managed to hold onto the 50 Simple Moving Average. Bears seem to gain ground but are far from control.

Some support awaits at 1.3545, the daily low, followed by 1.3480, which provided support in the holiday season. Further down, 1.3445 and 1.34 await GBP/USD.

Resistance awaits at the daily low of 1.3565, followed by 1.3675, Wednesday's peak. Further above, the 2021 high of 1.3705 looms.

GBP/USD Price Forecast 2021: Cable braces for calendar comeback amid three exits

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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