- GBP / USD has returned from the 1.3850 low to trade above 1.3900 again.
- The pair has been traded on the dollar, which was boosted by rising US bond yields.
Having fallen as low as 1.3865 in the previous trade, the GBP/USD It has rallied and is now back above the 1.3900 level and appears to be consolidating around 1.3925 as volumes decline over the weekend. But the pair is still down 0.5% or nearly 70 pips on the day, with the US dollar dominating against most of its G10 counterparts aside from the loonie.
Performance of the day
The US dollar has been in the lead in the currency markets on Friday and GBP / USD was no different. The pair fell back from the Asian session highs at the 1.4000 level as the US dollar rallied along with a rally in US government bond yields (which started during the Asia Pacific session).
Market commentators attributed the rise in US government bond yields to 1) the fact that US President Joe Biden signed his 1.9 trillion stimulus “rescue” package. dollars on Thursday, providing a strong boost to the short-term outlook for the US economy 2) amid further talk about the upcoming US fiscal stimulus package, which will focus much more on rejuvenating infrastructure in the US and could be priced well above the bill that just passed.
Just as the $ 1.9 trillion package boosts the short-term outlook, a multi-trillion infrastructure package, likely to be invested over the next four years, would provide a significant boost to the longer-term outlook for the path. growth rates – A key question among market participants right now is whether this will lead to the overheating of the US economy and the Fed’s tightening policy earlier than is currently estimated in the US. markets. The higher these fears, the higher the yields and the US dollar and more currency pairs like GBP / USD will suffer.
Regarding UK related news, there hasn’t been much to note other than the January hard data release from the ONS during the European morning; GDP was stronger than expected in the first month of the year, but industrial production was weaker. One report worth noting that will certainly be a disappointment for Brexit supporters is a Telegraph article claiming that a trade deal between the United States and the United Kingdom might not come until 2024, as the Biden administration prioritizes internal issues. and the foreign policy challenge presented by the rise of China.
As for the key issues / economic events to watch for next week; both the FOMC and the BoE will make rate decisions, and this will keep the GBP / USD trader busy for the middle of the week. February US retail sales will also be available on Tuesday.
Technical Levels
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