GBP/USD has surged above 1.41, benefiting from dollar weakness and from favorable election results in the UK. In the view of economists at TD Securities, the greenback should remain in a consolidative tone until data suggests that the April’s payrolls was a temporary aberration. If anything, it should redirect focus to currencies where central banks have undergone a ‘hawkish’ pivot to perform vs. the USD. This includes the pound.
Friday’s soft US jobs reading for April send the USD weaker
“Over a more medium-term horizon, a softer payrolls report should reinforce a broadly consolidative tone in the USD. If anything, it will probably help to redirect focus in currencies where a ‘hawkish’ central bank pivot has already occurred. This includes the GBP after last week’s BoE meeting.”
“GBP has been the day’s best performer today, afte r aste of market-friendly outcomes in local elections were announced. There wasn’t a lot of election risk premium priced in ahead of the event (if any), so it is an open question as to how far GBP’s uptick can run.”
“Cable has finally been able to make a sustained push above 1.40 for the first time since February, making that threshold now primary support for the foreseeable future.”
“Looking higher, we do not have a lot of natural attractors until we get to the end-February high at 1.4237. All else equal, that suggests we could be in for a bit of price discovery near-term.”
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