Last week’s data-flow out of the UK was once again supportive for sterling, as strong retail sales, good PMIs, inflation rising (although slightly below expectations) and unemployment edging lower all endorsed the strong recovery narrative in the country. GBP/USD is flirting with the 1.39 level and economists at ING believe a break above 1.40 is on the cards.

Fed still positioned very dovishly at Wednesday’s FOMC meeting

“The data calendar is very quiet, and no Bank of England officials are scheduled to speak.”

“With covid cases rising again across the world and the UK having recently relaxed containment measures, incoming contagion/hospitalisation data in the UK will be key to test the effectiveness of the country’s vaccination programme, and ultimately drive expectations about the economic recovery.”

“From a technical perspective, sterling still scores as undervalued against the dollar, suggesting GBP/USD should be able to break above 1.4000 in the coming days without excessive resistance, especially if our bearish view ahead of the FOMC meeting on Wednesday proves correct.”

 

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