GBP/USD has been rising on vaccine and Brexit optimism but struggles around the next budget and concerns about lockdowns may weigh on the pound. Meanwhile, Monday’s 4-hour chart is painting a bullish picture, Yohay Elam, an Analyst at FXStreet, reports.
“Back to normal sometime after Easter – that is the promise from Matt Hancock, the UK’s health minister. He has been speaking after AstraZeneca and the University of Oxford reported some results from their COVID-19 vaccine trial. The average efficacy is around 70% – lower than the competition from Pfizer/BioNTech and Moderna. However, AstraZeneca says that a smaller dosing regimen of 1.5 shots instead of two is 90% efficient. Moreover, as the British government has an agreement to purchase 100 million doses the pound also responded positively.”
“The British media has been reporting that a Brexit agreement is ‘95% done’ and basically imminent. However, investors have known that most of the details of future EU-UK relations have been ready for some time, while that 5% – fisheries, state aid, and governance – remain sticking points. An accord is not fully priced in and could boost the pound. However, if time passes by without white smoke from Brussels, sterling could suffer.”
“Another hurdle is the upcoming budget. While Chancellor of the Exchequer Rishi Sunak committed to refrain from austerity, he is reportedly considering a pay freeze for most public workers. Such a move is already angering unions and could weigh on consumption.”
“British covid statistics have stabilized but are yet to bend lower. The current nationwide lockdown expires on December 2 and the government is set to return to a localized approach. However, the new tiers may include relatively robust restrictions.”
“The cable is benefiting from upside momentum on the 4-hour chart and is trading above the uptrend support line that has been accompanying it from early November. It is also holding above the 50, 100 and 200 Simple Moving Averages. Some resistance is at the daily high of 1.3360, followed by 1.3420 and 1.3510 seen in the summer. Support awaits at the previous resistance line of 1.3310, see in mid-November. It is followed by 1.3280, which held the currency pair on its way up.”