- GBP / USD rose for the second day in a row on Thursday.
- Some weakness in the dollar and the previous one from the ECB seem to have given support to the pound.
- The pair’s advance comes despite Brexit issues, COVID-19 nervousness and comments from Broadbent of the BoE.
The GBP / USD maintained its positive tone during the first half of the European session and prior to the decision of the European Central Bank, it extended the upward trend reaching 1.3768, the highest level since the start of the week. It then pulled back and is trading 1.3750 / 55.
The Wednesday the pair climbed more than 130 pips from levels below 1.3600 and on Thursday it rises for the second day in a row. The momentum was supported by some weakness in the US dollar and optimism in equity markets.
The resurgence of COVID-19 infections in the UK, coupled with the lack of agreement on the Northern Ireland Protocol continued to act as a headwind for the pound. New cases have increased by more than 50,000 in one day in the UK. On the Brexit front, the European Union rejected the UK’s demand for a new approach to the Northern Ireland Protocol.
Apart from this, the comments of the lieutenant governor of the Bank of england (BoE), Ben Broadbent on Inflation further collaborated to keep a check on any strong gains for GBP / USD. During a speech scheduled for Thursday, Broadbent was unconvinced that current inflation means higher inflation 18-24 months ahead.
The market reacted quickly and delayed expectations of a 15 bps rise by the BoE to August 2022 from May 2022. This was seen as a key factor behind a modest decline in the pound. Then the pair resumed the rises, while the EUR / GBP extended the fall to the 0.8560 area, awaiting the decision of the European Central Bank.