Easing of covid restrictions are coinciding with a rebound in GBP/USD but political uncertainty into the May 6th regional elections should cap further GBP gains, according to economists at Westpac.
Positioning rebounding could trigger a retest of early 2021 highs
“This week has seen the reopening of non-essential retail operations and outdoor areas of cafes, bars and pubs, though those without outdoor areas remain closed or open for take-away services only. Critical for further lifting of restrictions will be whether there will be any increase in covid case counts and especially hospitalisation.”
“The process of reopening is also likely to impact the coming 6th May local elections and the critical Scottish Parliamentary election. Support for SNP has pulled back from its late 2020 heights as the Brexit trade deal was being finalised but remains high and so concerns over another Independence referendum may rattle markets into the 6th May elections, which is also when the BoE hold their next policy meeting.”
“The recent slip in CFTC leveraged positions coincided with GBP’s consolidation into April. A further lift in positioning could force a more notable test of this year’s 1.4237 high, but the risk of political threats to the Union suggests that rebounds will be capped, at least until the 6th May.”
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