- GBP / USD has fallen from around 1.3900 to below 1.3850, with the British pound among the worst performing G10 currencies on the day.
- Technical weakness in the EUR / GBP and GBP / JPY crosses appears to be the main driver of the GBP / USD losses.
The GBP/USD has receded from the levels of the Asian session around the level of 1.3900 and, after hitting lows in the 1.3810 at the start of the European session, now trading around 1.3850. That means the pair has incurred losses of around 40 pips or just over 0.3% on the day. GBP is one of the worst performing G10 currencies on the day, with GBP / USD now trading near its 21- and 50-day moving averages again.
GBP inexplicably lower
There are not many fundamental explanations for the strong underperformance of the GBP on Tuesday against its major counterparts such as the USD, EUR and JPY. Taking profits and adjusting positions against rates such as the euro and the yen, with both crosses (EUR / GBP and GBP / JPY) at multi-month extremes, is probably an explanation. Markets have aggressively priced a narrative of short-term outperformance in the UK amid the country’s comparatively rapid vaccine rollout and continued progress toward reopening.
On this last point, the Prime Minister of the United Kingdom confirmed on Monday that the UK will move to stage two of its reopening plan. Non-essential retail and virtually all other non-hotel businesses will be able to reopen to the public on April 12 and this is bound to provide a significant boost to the economy. But all this optimism is likely to be increasingly discounted “in price,” a notion that could encourage profit-taking. (as we have seen this Tuesday) and could slow the appreciation of the British pound.
In terms of economic and political events, the rest of the week will be quiet in the UK. Therefore, the focus is likely to be primarily on the launch of the vaccine in the country and the rates of Covid-19 infection. Meanwhile, USD traders will be keeping an eye on the Fed’s developments, and Federal Reserve Chairman Jerome Powell will speak on Thursday after the release of Wednesday’s FOMC minutes (from the March meeting).
GBP / USD technical levels
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