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  • Having found decent support at the 50DMA, GBP/USD is consolidating in the mid-1.3800s.
  • The pair is flat on the day ahead of a busy economic calendar in the US and UK this week.

GBP/USD has bounced twice so far this Monday from its 50-day moving average, which currently resides just above 1.3820, amid what has for the most part been quite a subdued start to the week for both sterling and the US dollar. The lack of conviction in the pair this Monday is not really very surprising given the raft of key economic/central bank-related events coming up in the US and UK later in the week; out of the US, there is a heavy slate of Fed speak as well as March PMIs and February Core PCE Inflation and, out of the UK, there will be remarks from BoE Governor Andrew Bailey twice, comments from BoE’s Jon Cunliffe and the release of the latest jobs report, February inflation and February retail sales data.

At present, the pair is trading just below highs of the day just to the north of the 1.3850 level, flat on the session. With the pair having been supported well at the 50DMA, some short-term bulls might be looking for a move back towards the psychological 1.3900 level and perhaps even a test of the 21DMA in the 1.3940s, though this week’s fundamental chips will have to fall correctly to facilitate such a move.

UK Update

UK news has played second fiddle amid Monday’s quiet market conditions, but there are some stories worth noting. Firstly, it appears as though the EU/UK vaccine dispute is souring; according to media reporting over the weekend, the EU is expected to block AstraZeneca vaccine shipments to the UK that could reduce the UK’s supply by 20% and delay the UK’s vaccine drive by two months. As a result, UK ministers are reportedly working on plans to speed up the onshoring of vaccine-making capabilities amid growing concerns about vaccine nationalism. The Times reported on Monday that the UK is prepared to avert an EU vaccine export ban by sharing some of their Dutch-made AstraZeneca jabs with the bloc. However, the UK has not gone as far as saying it will send vaccine made in the UK to the EU. Whether the EU will accept such as offer is another thing, the move by the UK could open the door to negotiation rather than further EU escalation.

Elsewhere, as the EU struggles to contain a third wave of Covid-19 cases and subsequently heads back into lockdown, UK PM Boris Johnson was out with some somewhat pessimistic comments on Monday, saying he expects the UK will feel the impact of the third wave in Europe soon – he has not, however, said anything about how the UK’s roadmap to reopening is under threat, which is the main thing for the economy and for GBP. But one effect of the third wave in Europe may be that travel bans are put in place to EU countries and this was something the UK health minister alluded to on Monday.

In terms of the latest UK Covid-19 data, things are very positive. Just 5.3K cases were recorded on Monday and daily deaths dropped to 17. This does reflect the weekend effect, which artificially suppressed cases and, as a result, cases in the coming days will be higher to make for this, but it looks as though daily deaths are now going to start to average out in double-digit rather than triple-digit territory, which is a very positive sign. Moreover, nearly 28M of the most vulnerable to the virus adults in the UK now having received at least one Covid-19 vaccine (which gives most of the protection) and all the data so far saying that vaccines work very well in preventing death, the hope is that there will not be another substantial spike in daily deaths.

Desks continue to argue that UK pandemic positivity is already “in the price” for GBP, but if the country is able to reopen without another spike in hospitalisations and deaths the relief surrounding such a success is likely to support GBP, at least versus the EUR, where unfortunately the pandemic situation is looking much worse but perhaps not so much versus USD, where the vaccine rollout is going very well.