- GBP/USD fades bounce off intraday low, prints three-day losing streak.
- UK’s vaccine rollout and unlock optimism fail to win over the US dollar strength ahead of Biden’s infrastructure spending plan.
- Final reading of Q4 2020 GDP and Britain’s virtual talks with G7 counterparts can offer intermediate moves.
GBP/USD remains depressed around 1.3727, down 0.10% intraday, while heading into Wednesday’s London open. In doing so, the cable respects the King Dollar while falls short of cheering vaccine and unlock optimism home ahead of the key UK GDP figures. Also important are the virtual talks among the Group of Seven (G7) ministers, to be held under the new WTO Chief’s observation.
The US dollar index (DXY) rises to a fresh high since November 2020 as global traders rush to the greenback amid upbeat US fundamentals and rising Treasury yields. Fears of the coronavirus (COVID-19), recently strong in Europe and Australia, joins the West versus China headlines to weigh on risks and propel the US bond demand. Also, American President Joe Biden’s push for 90% of adults’ vaccinations by April-end and hopes of no tax hike offer extra strength to the US dollar.
At home, half of the British locals are immune to the covid thanks to the UK’s vaccination drive. While the same helped England to ease more activity restrictions, hopes of the fourth UK vaccine of the COVID-19, namely Novavax, to arrive in four weeks also portray optimism for Britain.
However, the UK’s readiness to push global leaders to get tough on China during today’s virtual meeting and criticism of the World Health Organization’s (WHO) covid report weighs on risks and favors the US dollar. Further, Brexit pessimism and likely confirmation of the downbeat GDP figures also add to the GBP/USD weakness.
Amid these plays, stock futures in the US and the UK struggle for a clear direction. However, US 10-year Treasury yields stray firm around the highest since January 2020 and back the US dollar.
Moving on, the UK Q4 GDP, expected to confirm preliminary estimations of 1.0% QoQ, may keep the GBP/USD pressured. Additionally, an escalation of the UK-China tension will be an extra negative for the cable. However, major attention will be given to how US President Biden manages to tame the tax-hike fears while also defending his multi-billion-dollar infrastructure spending plan. Also, the US ADP Employment Change for March will be an additional detail to watch.
Read: ADP Private Payrolls March Preview: Consumers look to an early spring?
Technical analysis
Failures to rise past-1.3850-55 resistance confluence, comprising a falling trend line from February 24 and previous support line from November 02, 2020, drag GBP/USD towards a nine-month-old rising trend line, at 1.3570 now. However, the monthly low of 1.3670 becomes the immediate support to watch.
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