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May 09 - 09:55 PM

GBP/USD - COMMENT-Sterling Jumps Out Of The Blocks - 1.4105 Beckons

By Andrew M Spencer  —  May 09 - 08:19 PM

Sterling jumped out of the blocks at the open on Monday, extending Friday's dollar-led 0.7% gain, by rising 0.3% as the dust settled on the UK's 'Super Thursday' elections.

Prime Minister Boris Johnson's party won the parliamentary seat of Hartlepool for the first time and did well elsewhere nL8N2MU1H5, as the strong vaccine rollout trumped the UK's very poor response to COVID-19 in 2020.
The sense of continuity is a positive for the pound.

Scotland's nationalists have vowed to force another independence vote after winning a majority in the Scottish parliament nL1N2MW04M, but this will be a drawn out process and should not impact sterling short term.

On the dollar side of cable, Friday's unexpectedly weak U.S. payrolls data provide the perfect scenario for further safe-haven USD weakness as fears of short-term inflation have diminished, though the market still expects robust growth nL1N2MT2XD

Technically, Friday's bounce has turned daily GBP/USD charts from neutral to bullish.
Momentum studies, 5, 10 and 21 daily moving averages rise, and 21-day Bollinger bands climb, adding to the positive signals.
The range top in March/April and 61.8% of the 2021 fall at 1.4022 have broken, opening the door to a test of 1.4105, 76.4% of the 2021 fall.
A close below Monday morning's 1.3983 low is needed to undermine the topside bias.

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Refinitiv IFR Research/Market Commentary


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