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Sterling is struggling to take advantage of dollar weakness and that may indicate an inability to reach higher ground. There are two reasons for the pound’s issues, according to FXStreet’s Analyst Yohay Elam.

Sterling’s rise hobbled by Brexit friction, rising UK covid cases

“Brexit refuses to die, and with it, the frictions around the Northern Ireland protocol. European Commission President Ursula von der Leyen stated there can be no changes to the agreement signed, angering London. UK Prime Minister Boris Johnson’s insistence that there will be no customs checks on the Irish Sea contradicts the Withdrawal Agreement. Both sides still need to settle regulations related to the services sector.”  

“Coronavirus cases have been picking up in the UK. Britain had been leading the vaccine drive among large economies and also benefited from the fruits of the effort – a quick reopening. However, the fast spread of a variant first identified in Britain has been causing an uptick. While the plans to fully reopen are still on track, the swing higher may further hobble sterling.”

“Some resistance is at the round 1.42 level. It is followed by 1.4220, May’s high, and then by the 2021 peak of 1.4240.”  

“Support is at 1.4160, a peak in early May, followed by 1.41, a support line from last week.”