GBP/USD has been hovering close to 1.40 as the dollar is off its highs. According to FXStreet’s Analyst Yohay Elam, only a surge in US yields can stop the cable from climbing above the 1.40 level.
See – GBP/USD: Set to test post-Brexit referendum highs – MUFG
Key quotes
“A combination of immunizations and the lockdown has brought Britain’s infections and hospitalizations sharply lower. All eyes are now on Prime Minister Boris Johnson and his highly-anticipated reopening speech on Monday. Leaks from Downing Street may come on Friday. If the plan is ambitious, it could give sterling the boost to bring it over the line.”
“UK Retail sales plunged by a whopping 8.2% in January, far worse than expected and a worrying sign for the economy moving forward. Nevertheless, GBP/USD continues its upward march. That can only lead to one conclusion – cable is showing its resilience and has more room to rise in response to even marginally better data.”
“While more money from Uncle Sam is positive for the global economy, it could push US ten-year yields to new highs. The global benchmark is already at around 1.30% and a move toward 1.50% would make the dollar more attractive and boost the greenback. More government spending means both stronger growth and also more debt issuance – causing returns to rise.”
“Hitting the 1.40 level may trigger choppy price action – many orders are likely placed around the round number. Above 1.40, the next lines to watch date to 2018 and these include 1.4110, 1.42 and 1.4240. Support awaits at 1.3950, the previous 2021 peak, followed by 1.39, then by 1.3880, and finally 1.3830.”
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