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Jan 20 - 09:55 PM

GBP/USD - COMMENT-Cocktail Of Factors Leaves Sterling In The Spotlight

By Andrew M Spencer  —  Jan 20 - 08:42 PM

Sterling hit a fresh 1.3720 trend high and EUR/GBP a 0.8838 trend low in Europe on Wednesday, with moves driven by all three components, leaving the pound at interesting levels as the news flow evolves.

Weakness in the dollar as risk appetite surged on U.S. stimulus expectations under a new administration supports GBP/USD nL1N2JV28C. Broad-based euro weakness is weighing on EUR/GBP as the euro zone struggles in the fight between the vaccine rollout and the spreading coronavirus nL8N2JV49M.

In the UK, there is finally some optimism on the outlook, after a COVID-19 policy that has lacked coherence, resulting in a record death rate nL9N2IC01T.
The vaccine rollout is working well, with over 4.6 million doses given so far, nL8N2JV5C2, while Oxford scientists are preparing vaccine versions to combat emerging virus variants nL1N2JV2XG.

Friday's UK GDP nL8N2JQ14H and higher inflation data on Wednesday nL8N2JU4UL suggest negative rates are unlikely, fuelling positive sterling sentiment, while Bank of England policymakers are signalling a strong rebound in the economy as the vaccines steadily gain traction on the coronavirus nL8N2JV59G.

Technically 5, 10 and 21 daily moving averages for GBP/USD are neutral, but in EUR/GBP they trend south.
A close below 0.8840 would be a strong negative signal, while a move back above 0.8900 would leave a resilient base in place.

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Source:
Refinitiv IFR Research/Market Commentary

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