- GBP / USD is trading higher and is currently pushing to new highs for the week above 1.3720.
- Risk appetite has improved significantly since the European market opened, weighing on the USD.
He GBP/USD it was on the defensive in the early part of the European trading session, falling to lows just above 1.3600 at the time of writing. However, having rebounded firmly from its 21-day moving average at 1.31115, the pair has spent the last few hours to the upside and is currently climbing to fresh week highs above 1.3720. The highs for the year are not too far off, just below 1.3750, an area the bulls will be targeting. GBP / USD appears to be benefiting from the general weakness of the US dollar rather than any specific strength of the GBP or positive fundamental developments in the UK.
Risk appetite weighs on the US dollar
Risk appetite has improved significantly since the European market opened, following a bearish Asia Pacific session, which weighed on the USD and lifted GBP / USD. US stocks have opened higher, European stocks have mostly erased Monday’s losses, crude oil markets are higher and bond yields are higher on both sides of the Atlantic. In currency markets, safe-haven currencies JPY, CHF, and USD lag the furthest, while the most risk-sensitive currencies lead the way.
As for the reasons why sentiment has improved positively; Positive vaccine news is likely helping. Moderna announced last night that it was going to begin researching a booster vaccine (to be produced 6 to 12 months after the second dose) and Pfizer will also study a booster dose. Meanwhile, after the release of a decent earnings report, Johnson & Johnson’s (J&J) CFO said they expect to release data from the Covid-19 vaccine trial next week and that the company is very optimistic that they will release a very robust data set. The J&J vaccine is touted as a “game changer” in the vaccination race, requiring only one injection to acquire full immunity.
UK News
The GBP / USD pair has been largely uninterested in fundamental UK developments on Tuesday and rightly so, as none have been of particular importance.
UK labor market figures released this morning still do not show an accurate picture of the UK labor market; the unemployment rate rose to 5.0% in November from 4-9% in October, less than expected from an increase to 5.1%. But many millions are still employed just as a result of the government’s licensing plan, which is likely to be canceled once the country reopens later in 2021.
British Prime Minister Boris Johnson will announce a new offensive against incoming travel to the UK; Incoming passengers will have to self-finance a quarantine in a hotel for 10 days. The new policy is likely to be set by the Prime Minister at the daily Covid-19 press conference at 17:00 GMT and is part of the UK government’s strategy to prevent foreign strains of the virus from entering the UK and making make the country’s vaccination efforts less effective.
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