GBP/USD: UK GDP and Brexit concerns can offset improving Covid-19 stats

GBP/USD is gaining +1.0% today as trades above 1.27. Concerns about Brexit have only had a limited impact, yet the story is set to grow in importance, in addition to fresh figures for the UK economy. The Fed's decision and coronavirus developments are also eyed, FXStreet’s analyst Yohay Elam informs.

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Key quotes

“Will Johnson make a dramatic intervention to salvage Brexit talks? The major sticking points remain fisheries – a minuscule industry yet one that is prized by Brexiteers – and general trading terms, especially those concerning the all-important financial services sector.”

“COVID-19 statistics remain of high interest. It is essential to note that figures published on Monday tend to be extraordinarily low and encouraging, but they tend to jump afterward. The seven-day rolling moving average should continue falling in order to provide more hope and a boost to the pound.”

“GDP figures for April stand out on the calendar. The data will allow economists to extrapolate the data and make better estimates for the devastation in the second quarter. The British economy shrank by 5.8% in March and the downfall was likely considerably worse in April.”

“The Fed will most likely leave the borrowing costs unchanged, resisting pressures to set negative rates. While the Washington-based institution will surely stress that uncertainty is high, an outlook that is not outright downbeat may boost sentiment and weigh on the dollar. A gloomy forecast, that reflects double-digit unemployment through year-end and a return to pre-pandemic output levels only late next year, will likely boost the greenback.” 

“Powell will nudge lawmakers to act to boost the economy, with a new fiscal plan still under consideration. If he conveys a sense of urgency, the dollar may rise, while omitting such a message would imply things have improved.”