GBP/USD: There is room for cable to reverse its gains

GBP/USD has bounced after the BoE's Haldane called on removing stimulus. Sell opportunity? Brexit and also reopening and inflation worries could push the pound back down, Yohay Elam, an Analyst at FXStreet, briefs.

See: UK's reopening worries offers an opportunity to buy sterling on EUR/GBP and GBP/AUD – OCBC

Brexit is back, and not in a good way

“We could start tightening the tap on QE – Andy Haldane, Chief Economist at the Bank of England, has single-handedly knocked sterling from its sleep and has sent it higher. He has also said that the UK economy is going ‘gangbusters’ and that he is already seeing price pressures. Cutting down on bond-buying means printing fewer pounds and thus a boost for the currency.

“Brexit is back and here to haunt the pound. The EU's Maroš Šefčovič is holding talks in London about the Northern Irish protocol, a pain point in relations between Britain and the bloc. While the economic impact of NI-GB trade is limited, worsening relations could cause jitters on other issues such as the lucrative financial services sector.” 

“There is a growing sense that the UK's ‘Freedom Day’ – the last stage of the reopening due on June 21 – will be delayed. Rising COVID-19 cases have prompted health officials and also the government to reconsider the loosening.” 

“China provided a heads up, reporting a surge of 9% YoY in producer prices last month. If consumers begin to feel the pinch in America, the Federal Reserve could follow Haldane's advice and taper bond buying sooner rather than later – boosting the dollar.”