- GBP/USD marched above the 1.4100 level on Tuesday and is now up over 3% on the month.
- Optimism over the UK’s vaccine rollout and reopening plans continues to boost GBP, but concerns the currency is becoming overbought are growing.
GBP/USD continued its upwards march on Tuesday and rallied confidently to the north of the 1.4100 mark for this first time since April 2018. As FX market volumes dip ahead of the start of Asia Pacific trade, the pair is consolidating just to the north of the 1.4100 level. As seemingly been the case more often than not this month, GBP again finished the session at the top of the G10 rankings, up 0.36% or about 50 pips.
Tuesday’s gains marked a fourth straight session in the green, during which time the pair has rallied from the mid-1.3800s to current levels nearly 250 pips higher. Out of the 17 trading session so far this month, GBP/USD has finished higher 13 times and has rallied north of 3% from the mid-1.3700s.
Driving the day
Sterling’s confident performance on Tuesday came despite a softish monthly labour market report – market participants haven’t seen these labour market updates from the UK Office of National Statistics particularly informative over the last few months given that the UK government’s furlough scheme, in which the government subsidises employee wages so long as they are kept on the company’s payroll, distorts the data.
More important for sterling are reports that UK Finance Minister Rishi Sunak is likely to extend the furlough scheme again until the end of May, after which it is hoped that most Covid-19 restrictions will have been lifted. But that was seemingly not the main focus of the day, according to traders, many of whom suggested that gains in sterling were down to continued optimism over the UK’s vaccine rollout and reopening plan. Reports from the Telegraph suggesting that the rate at which the UK government eases lockdown restrictions could be accelerated if real-world data on the effectiveness of vaccines is better than expected is likely to support this GBP bullish narrative.
Some market commentators also point to sterling supportive M&A news; UK insurance company Aviva confirmed on Tuesday the sale of its French unit to France’s Aema Groupe for EUR 3.2B (which equates to £2.7B).
Note that more and more FX strategists are ringing alarm bells about how GBP might be entering overbought territory. After all, GBP/USD is up nearly 2% in four days. Some profit-taking might be in order.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Bitcoin price extends retreat from $69K as old whales shift their holdings to new whales
Bitcoin price continues to move further away from the $69,000 threshold, gaining ground as BTC bulls hope for a retest of the $73,777 peak. This is because of the general assumption that clearing this blockade would set the tone for a reach higher, marking a new all-time high.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.