- GBP/USD picks up bids as bulls eye 1.3900, US dollar weakness favors the upside.
- WHO defies call to dismiss AstraZeneca vaccine, British scientists embrace booster for covid variant.
- EU-UK envoys target receding trade tension with the US, Brussels poised to reject two-year extension over NI border.
- NIESR cuts British GDP forecast for 2021 to 3.4%.
GBP/USD stays firmer around 1.3780, the highest since April 30, 2018, while heading into Tuesday’s London open. The cable breaks the 13-day-old trading range to the north as broad US dollar weakness supersede uncertainty over Brexit and the coronavirus (COVID-19) vaccine news from the UK. Also favoring the mood could be the recent trade optimism amid a light calendar.
US dollar index (DXY) drops for the third day in raw to test one week low as the market’s risk-on mood joins reflation fears and directs traders to the bonds from the greenback.
To check the risk catalysts, the US Democratic Party’s readiness to go ahead with the $1.9 trillion covid stimulus without waiting for the Republicans’ assent to the details favor mainly favors the mood. Also backing expectations was the latest tweet from US President Joe Biden saying, “I know a lot of folks out there are losing hope, so I want to make one thing clear: I’m going to act as fast as I can to get Americans the relief they so desperately need.”
At home, the European Union (EU) and the UK finally join hands to tackle the trade issue over the US aircraft subsidies. The trade optimism could also be witnessed from the UK’s intention, gauged from a Bloomberg piece, to have deeper trade ties with America.
Further, the World Health Organization (WHO) insisted on the use of the AstraZeneca vaccine despite claims over its efficacy on the South African variant of the coronavirus (COVID-19). The BBC’s news suggesting UK scientists are developing booster jabs to tackle Covid-19 variants, per the British Health Minister, also favor the vaccine optimism. To tame the bulls, The Guardian came out with the news, quoting British scientists, which says, “Leading vaccine scientists are calling for a rethink of the goals of vaccination programs, saying that herd immunity through vaccination is unlikely to be possible because of the emergence of variants like that in South Africa.”
Challenging the mood could be the UK-EU tussle over the Northern Ireland border as Reuters said, “Britain called on Monday for a reset in relations with the European Union and a refinement of a Brexit deal covering trade with Northern Ireland (NI), saying trust was eroded when Brussels attempted to restrict COVID-19 vaccine supplies.” Although Britain asked for a two-year extension to the NI border issue, The Telegraph says Brussels is poised to reject UK’s calls for an extension to Northern Ireland grace periods.
Also on the list of negative for the British pound could be the economic forecast from the UK’s National Institute of Economic and Social Research (NIESR) that cut growth forecast for 2021 to 3.4% from a previous estimate of 5.9%, per Reuters.
Even so, the US dollar weakness dominates above all and helps the GBP/USD bulls to battle multi-month top.
Looking forward, risk catalysts remain as the key to GBP/USD upside even as a light calendar test the moves.
Technical analysis
A daily closing beyond the resistance line of a rising triangle formation established since March 2020, at 1.3750 now, becomes necessary for the GBP/USD bulls to keep the reins.
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