- The pound falls during the US session, with its eyes set on COVID-19 and BoE.
- DXY at monthly highs near 91.00, Wall Street recovers.
The GBP/USD it is trading near the daily low as the US dollar gains momentum across the board during the US session. The cable is around 1.3670, with a drop of 30 pips on the day. Earlier on Monday, it tested the recent high around the 1.3755 / 60 zone and then corrected lower.
The pound weakened in recent hours, turning negative against the dollar and cutting gains against the euro. No particular event triggered the correction in the British pound. In the UK, the focus remains on the progress of the vaccine and what the Bank of England (BoE) could announce on Thursday. “The most optimistic potential outcome for the pound would be if the Bank of England leaves the key policy rate unchanged, and consultation with lenders further slows speculation on negative rates in the near term. It could open the door to more GBP gains by raising the cable closer to 1.4000, ”explained MUFG Bank analysts.
GBP / USD bottomed out at 1.3655 and then rallied, unable to rebound 1.3700. A stronger dollar keeps the pair under pressure. The DXY is at the highest level in more than a month, at 90.99. Equity markets are relatively stable on Monday, after having the worst week since October. The Dow Jones is up 230 points or 0.77% and the Nasdaq is up 2.35%.
From a technical perspective, the GBP / USD trend is still bullish, but for the pound to clear the way for further gains, it needs to firmly break out of the 1.3750 area. On the other hand, the key support is the 20-day simple moving average, today at 1.3645. A daily close below would suggest a more significant correction going forward.