GBP/USD: Difficult to see a move beyond 1.30

GBP/USD is moving toward 1.30 as the dollar loses steam ahead of the Fed. The cable could spike above 1.30 but it is hard to see a sustained move from there as the UK’s relations with Europe, China and even America could pressure the pound, FXStreet’s analyst Yohay Elam reports.

Key quotes

“The UK’s decision to advise against traveling to Spain angered airlines and the government in Madrid alike. Moreover, it seems like the PM punched back at Europe – being gleeful at the rise in cases after Britain was previously compared unfavorably to other countries.”

“The greenback has been struggling amid rising US coronavirus cases, unwinding of the safety trade, disagreement in Washington about the next fiscal steps – days ahead of the expiry of federal unemployment benefits.”

“Jerome Powell, Chairman of the Fed, will likely be asked about Yield Curve Control (YCC) and may warm up to the idea. YCC means the Fed pushes long-term borrowing costs to a certain range. If Powell hints it is under active consideration, the dollar has more room to fall. If he passes the ball to lawmakers, the greenback would recover.” 

“In the UK, Brexit negotiations are going nowhere fast, with the only good news being the commitment of both London and Brussels to continue talks. Britain’s tensions with Beijing also remain high amid China’s tighter grip on Hong Kong and the UK’s phasing out of Huawei gear.”