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GBP/USD has been benefiting from the dollar’s pause in gain. But, while the vaccine truce is positive for the pound, fresh dollar strength is likely, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“The EU and the UK kicked off talks to defuse tensions around vaccine distribution and released an initial statement in which they vowed to strive for a ‘win-win’ situation. Assuring an ongoing supply of doses is positive news, but progress hinges on calm at Thursday’s EU Summit. If the bloc’s leaders vent frustrations of their citizens and point fingers at Britain’s, the pound could further suffer.”  

“US infrastructure spending has growing chances of becoming reality after moderate Democratic Senator Joe Manchin gave his blessing. New government investment may trigger inflation and push the Federal Reserve to raise rates sooner rather than later. Funding will partially come from tax hikes on corporations – and that may dampen the mood on Wall Street, adding to a flight to USD safety.”

“US President Joe Biden is set to deliver a speech on the economy next week, and in the more immediate term, US jobless claims could boost the greenback. After jumping two weeks ago, they dropped last week and are set to extend their trend. The final read of growth figures for the fourth quarter of 2020 are also eyed, and will likely confirm the 4.1% annualized growth rate.”

“Support awaits at the March low of 1.3675, followed by 1.3610, a resistance line from early February. Initial resistance is at the daily high of 1.3720, followed by 1.3740.”