GBP / USD stabilizes around 1.3950 after a sharp decline at the end of the month

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  • GBP / USD is stabilizing around 1.3950 as the week draws to a close.
  • On the week, having risen more than 1.6% – at highs, GBP / USD looks set to end the week down 0.3%.

The GBP/USD It is stabilizing around 1.3950 as the week draws to a close, well below multi-year highs set Wednesday near 1.4250, yet comfortably above Friday session lows below 1.3900 set at Wednesday. beginning during European trade. On the day, the pair is trading lower by about 0.4% or 55 pips.

The British pound has succumbed to a broad recovery in the US dollar, which enjoyed inflows as a result of safe-haven demand amid a largely risk-free market tone (global equities, commodities, and risk-sensitive currencies). They have suffered). Market commentators think the defensive risk bias is due to concerns about recent movements in the bond markets; Developed market bond yields have soared higher this week, although yields in most countries are considerably lower on Friday. End-of-month flows are also said to work in favor of the US dollar. On the week, having risen more than 1.6% to its highest point, GBP / USD looks set to end the week with losses of around 0.3%. That means it is the second best performing G10 / USD pair in the week after EUR / USD, which appears poised to end the week down 0.2%.

Performance of the day

The factors mentioned above were the main forces that dictated price action on Friday with UK fundamentals playing a secondary role. There were some interesting comments from Bank of England officials; Chief Economist Andy Haldane made some rather aggressive comments, saying there is a tangible risk that inflation will prove harder to control than expected and require monetary authorities to act more assertively than what is currently traded in financial markets. . However, Haldane is a known hawk, which perhaps explains the GBP’s lack of interest.

By contrast, Bank of England Deputy Governor Dave Ramsden was much more dovish on inflation; He noted that UK inflation is still below 1%, a reflection of the fact that the economy is still being hit hard by the pandemic and said that although he expects inflation to hit the Bank of Bank’s 2.0% target England for 2022, sees the risks sloping downward. As with Haldane’s comments, GBP didn’t show much of a reaction.

Elsewhere, in terms of the most recent pandemic; 19,178 million people have received at least one Covid-19 vaccine in the UK, meaning that more than 35% of the UK adult population has already been vaccinated. Daily new infections continue to decline (reaching less than 9,000 on Friday) and the latest weekly government estimate of the rate of R nationwide was unchanged at 0.6-0.9, implying that the prevalence of the virus is falling. reducing between 2% and 6% per day.

Going forward, “the GBP will benefit from the idiosyncratic vaccine dividend and less dovish BoE, while the cautious Fed presiding over deeply negative real US entry rates should also contribute to a higher GBP / USD,” he says. ING.

Technical Levels

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