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  • GBP/USD has  slipped  back to support at the 1.3800 level in recent trade.
  • But sterling is still the best performing currency in the G10 on the day so far.

GBP/USD has been on the back foot in recent trade, falling back from session highs in the 1.3840s set during the early part of European trade, but still holding above 1.3800 for now, which is an area of support from last Friday. The pair appears to have run into resistance in the form of its 50-day moving average.

A break above this level would open the door to a move above the 1.3850 mark and likely on towards the 21-day moving average at 1.3871. At present, the pair still trades with gains of about 20 pips or 0.15% on the session and sterling is actually one of the best-performing currencies in the G10, though USD has been picking up recently and could soon dethrone sterling.

Driving the day

No fresh fundamental catalysts/unexpected developments seem behind Monday’s outperformance in pound sterling, but traders are citing a combination of optimism as the UK moves one step closer to ending lockdown restrictions and amid increased chatter from UK government officials regarding the imminent arrival of a large number of Moderna vaccine doses. Starting with the former; the UK has on Monday moved to the next stage of its roadmap out of lockdown, with the government’s “stay-at-home” advice that has been in place for over three months being eased – people are now allowed to meet outside in larger groups and outdoor activities (such as sports) have pretty much been given the complete go ahead. This may provide a small boost to the economy but the big relief is coming on 12 April when non-essential retail stores are given the green light to reopen.

With regards to the UK’s progress out of lockdown, UK PM Boris Johnson was on the wires earlier talking about how the country remains on track to get rid of most restrictions by 21 June. As noted, there has been increased chatter from other UK officials regarding Moderna vaccines – the UK has ordered 17M doses of the jab which will start to arrive in April, easing fears of vaccine shortages that have recently been triggered by the shift towards vaccine nationalism in the EU and India.

In other news, Bank of England Monetary Policy Committee member Gertjan Vlieghe was speaking to the UK press earlier and, unsurprisingly, was sounding dovish; a few strong quarters of growth should not mean the bank alters its monetary policy stance, he said, adding that some inflation this year would not be nearly enough to conclude that the economy no longer needs monetary help.

Looking ahead, GBP there is not too much of importance of the economic calendar in the UK this week and so focus will thus instead be mostly on the USD side of the equation; dollar traders will be on notice for the March ISM manufacturing PMI survey on Thursday, ahead of NFP on Friday, though markets will be closed for Good Friday holiday. Expect some unpredictability with regards to the price action over the next three days due to month/quarter-end flows.