- GBP/USD has dropped back beneath the 1.3600 level in recent trade as a result of broad US dollar strength.
- Though USD has seen significant recovery in recent trade, GBP/USD is still higher on the week.
GBP/USD has dropped back beneath the 1.3600 level in recent trade, not as a function of any UK related domestic news but rather as a result of a broad pick up in the US dollar that has seen the Dollar Index advance back to fresh highs on the week beyond in the 90.70s. At present, the pair trades with losses of around 100 pips on the day or about 0.7%.
No specific news or headline is behind recent USD strength, though analysts and market commentators are pointing to a few developments that are likely acting as a headwind to sentiment and thus helping the safe-haven US dollar.
Some market commentators think markets are seeing a “sell the fact” reaction in wake of incoming US President Joe Biden’s stimulus plan. Others are pointing to pandemic news that has admittedly been a little worrying on Friday, with more and more European nations heading for tighter lockdowns (Italy and Germany are toughening restrictions) and Pfizer is delaying its shipments of vaccines to the continent temporarily as it upgrades production capacity in its European factory.
Meanwhile, recently released US Retail Sales numbers for December were ugly (and come on the back of an equally ugly December jobs report and poor weekly jobless claims data for the first full week of January) and the outgoing Trump administration continues to do the best it can to sour US/China relations before the arrival of the Biden administration (the Pentagon blacklisted nine additional).
With Fed Chair Jerome Powell reasserting the Fed’s dovish credentials (and seemingly provoking a positive reaction in the bond markets in his wake, with real yields falling and inflation expectations rising), market participants might not be rushing to get long USD just yet. But given all of the above, an increasing number of them, in a market that has been very heavily short USD over the last few months, might be closing out long-term shorts.
Though USD has seen significant recovery in recent trade, GBP/USD is still higher on the week and GBP still retains its spot as this week’s best G10 FX performer. GBP has been emboldened by the UK’s progress with its mass vaccination programme, which is well ahead of most of its developed market peers. Reports last night suggest that the country is going to attempt to ramp up daily vaccinations to 500K per day, with vaccines potentially set to be administered 24/7. This means all over 50s might be able to be vaccinated by the end of March.
Meanwhile, the currency has also received tailwinds from a repricing of money market expectations for BoE negative interest rate policy (NIRP) in 2021 and beyond; after comments from BoE Governor Andrew Bailey earlier in the week, who did not sound overly enamored with NIRP at all, markets downgraded their bets for further rate cuts in the coming months, supporting sterling.
|Today last price||1.3593|
|Today Daily Change||-0.0100|
|Today Daily Change %||-0.73|
|Today daily open||1.3693|
|Previous Daily High||1.371|
|Previous Daily Low||1.3617|
|Previous Weekly High||1.3704|
|Previous Weekly Low||1.3532|
|Previous Monthly High||1.3686|
|Previous Monthly Low||1.3134|
|Daily Fibonacci 38.2%||1.3675|
|Daily Fibonacci 61.8%||1.3652|
|Daily Pivot Point S1||1.3636|
|Daily Pivot Point S2||1.358|
|Daily Pivot Point S3||1.3543|
|Daily Pivot Point R1||1.373|
|Daily Pivot Point R2||1.3767|
|Daily Pivot Point R3||1.3824|
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.