GBP/USD Forecast: Sterling well-positioned to pull up with Powell after Boris' boost


  • GBP/USD has been moving higher in response to the UK's reopening plan, stable US yields.
  • All eyes are on Fed Chair Powell, who will likely weaken the dollar. 
  • Tuesday's four-hour chart is showing that cable is near overbought conditions.

Slow, but irreversible – that has been Prime Minister Boris Johnson's message when presenting his lengthy reopening plan, and the GBP/USD may echo his words in ts upwards march. Cable is nearing 1.41 in a relentless rally. 

While investors prefer a quicker return to normality – especially as COVID-19 statistics have been falling sharply – the government's cautious four-month exit scheme has been well-received by markets, which seem convinced that the current lockdown is the last. Moreover, the program receives broad support from the public, the opposition, the medical community – and also from the Treasury, which is set to extend its furlough scheme. 

The pound also received a boost from labor figures. While the Unemployment Rate rose to 5.1% in December, that met expectations. On the other hand, wage growth accelerates to 4.7% yearly and the more recent jobless claims figure dropped by 20,000 in January, exceeding estimates. 

On the other side of the pond, US bonds received a fresh bid, lowering their yields and pushing the dollar down. Returns on ten-year Treasuries – the global benchmark – have fallen from the 1.40% level. 

All eyes are now on Jerome Powell, Chair of the Federal Reserve, who testifies before Congress later in the day. Will the world's most powerful central banker soothe markets by promising to do more? That would lower yields but could also trigger fears of inflation. On the other hand, Powell can afford to cheer the current comeback in yields – seen as a healthy sign of the return to normality – in fear of a market meltdown. 

Back in 2013, the then-Chair of Ben Bernanke triggered a "taper tantrum" by hinting at reducing the Fed's bond-buying scheme. Powell, then a Governor on the Fed's board, has probably learned the lesson and will likely err on the side of keeping markets calm – even at the risk of rising inflation fears. With ten million people out of work in America, there is no time to lift the pedal from the metal.

More Dollar outlook: How will surging Treasury yields affect Powell’s testimony

Also on Capitol Hill, a House committee advanced President Joe Biden's $1.9 trillion stimulus package toward a vote on the floor of the lower chamber later this week. While the Senate may water down the plan, Democrats seem keen on pushing it through. However, the focus on Tuesday is on Powell. 

All in all, the sterling has reasons to rise and the dollar has pressure from Powell to fall. 

GBP/USD Technical Analysis

The Relative Strength Index is just above 70 – signaling moderate overbought conditions that imply a pause in the rally. However, a look at the recent past shows that the RSI can hold onto high ground for long periods. Other indicators are positive – momentum is to the upside and cable is above the 50, 100 and 200 Simple Moving Averages. 

The fresh multi-year high of 1.4097 is the immediate cap. Further above, levels dating to early 2018 await GBP/USD – 1.4145, 1.4255 and 1.4370. 

Support awaits at the daily low of 1.4050, followed by 1.3980, and 1.3950, both stepping stones on the way up.

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

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.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

GBP/USD holds above 1.4050 after upbeat UK job figures

GBP/USD is trading above 1.4050, near the fresh 35-month highs as US yields retreat from the highs and push the dollar lower. UK wages rose by 4.7% in December and January's jobless claims fell by 20,000, both better than expected. 

GBP/USD News

Bitcoin stages a quick bounce above $50,000 after the 11% sell-off

The wild ride in Bitcoin continues in Tuesday’s Asian trading, as the BTC sellers are back in control, knocking off prices by almost 11%. Although, strong bids emerged just above $48,500 levels, prompting the flagship cryptocurrency to stage a quick recovery back beyond the $50,000 mark.

Read more

EUR/USD sets four-week high, eyes Powell's testimony

EUR/USD advances toward 1.2200 but is struggling to keep the bullish momentum going, with investors turning cautious ahead of the Fed Chairman  Powell's appearance before Congress later Tuesday.

EUR/USD News

XAU/USD retreats from one-week tops, on the defensive below $1810 level

A combination of factors failed to assist gold to capitalize on the early uptick to one-week tops. The underlying bullish tone in the financial markets capped gains for the safe-haven commodity. The recent rally in the US bond yields also held bulls from placing bets around the yellow metal.

Gold news

US Dollar Index struggles for direction around 90.00, looks to Fed, data

DXY consolidates the recent drop and hovers around 90.00. The dollar has decoupled from performance in yields in past hours. Housing data, Fed’s Powell testimony, Consumer Confidence next on tap.

US Dollar Index News

Forex Majors

Cryptocurrencies

Signatures