- GBP/USD is on the front foot and is currently pushing to fresh highs of the week above 1.3720.
- Risk appetite has taken a significant turn for the better since the European market open, weighing on USD.
GBP/USD was on the back foot in the early part of the European trading session, dropping to lows of just above the 1.3600 level at one point. However, having bounced firmly from its 21-day moving average at 1.31115, the pair has spent the last few hours on the front foot and is currently now pushing to fresh highs of the week above 1.3720. Highs of the year are not too far off at just under the 1.3750 mark, an area the bulls will be targeting. GBP/USD appears to be benefitting from broad US dollar weakness rather than any GBP specific strength or positive UK fundamental developments.
Risk appetite weighs on the US dollar
Risk appetite has taken a significant turn for the better since the European market open, after a downbeat Asia Pacific session, weighing on the USD and lifting GBP/USD. US stocks opened in the green, European equities have for the most part erased Monday’s losses, crude oil markets are higher and bond yields are higher on both sides of the Atlantic. In FX markets, safe-haven currencies JPY, CHF and USD are the laggards whilst the more risk-sensitive currencies are in the lead.
In terms of the reasons as to why sentiment has taken a positive turn for the better; positive vaccine news is likely helping. Moderna announced last night that it was to start investigating a booster vaccine shot (to come 6-12 months after the second dose) and Pfizer is also to look into a booster dose. Meanwhile, after the release of a decent earnings report, the Johnson & Johnson (J&J) CFO said that they expect to release Covid-19 vaccine trial data next week and that the company is very optimistic that they will be releasing a very robust data set. J&J’s vaccine is being touted as a “game-changer” in the vaccination race as it would only require one shot to acquire full immunity.
GBP/USD has been largely uninterested in UK fundamental developments on Tuesday and rightly so as none have been of particular importance.
UK labour market numbers released this morning still do not paint an accurate picture of the country’s labour market; the unemployment rate rose to 5.0% in November from 4.9% in October, less than expectations for a rise to 5.1%. But many millions are still employed only as a result of the government’s furlough scheme, which is likely to be unwound once the country re-opens later in 2021.
UK PM Boris Johnson is set to announce a new crackdown on incoming travel to the UK; incoming passengers will need to self-fund a quarantine in a hotel for 10 days. The new policy is likely to be laid out by the PM at the daily 17:00GMT Covid-19 press conference and is part of the UK government’s strategy to prevent foreign strains of the virus from entering the UK and rendering the country’s vaccine efforts less effective.