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The GBP/USD pair regained positive traction on the first day of a new trading week and retested multi-year tops, around the 1.3755-60 region during the early European session. Diminishing odds for a Bank of England (BoE) rate cut was seen as a key factor that benefitted the GBP while the UK Manufacturing PMI was finalized at 54.1 for January and remained supportive, FXStreet’s Haresh Menghani briefs.

Key quotes

“The British pound benefitted from chatters about the further easing of coronavirus restrictions in the UK and diminishing odds for any BoE rate cut in 2021. In fact, UK money markets indicated that investors have pushed back bets for 10bps interest rate cut by the BoE to 2022 vs the previous expectations for such a move in December.”

“The UK Manufacturing PMI was finalized at 54.1 from 52.9 estimated previously and remained supportive of the bid tone surrounding the major. Later during the early North American session, investors will take cues from the release of the US ISM Manufacturing PMI. This, along with the broader market risk sentiment and the US stimulus headlines, will influence the USD price dynamics and produce some trading opportunities.”

“A sustained move beyond the 1.3755-60 congestion zone will be seen as a fresh trigger for bullish traders and push the pair towards the 1.3800 mark. Some follow-through buying beyond the 1.3840 region should accelerate the momentum and assist the pair to aim back to reclaim the 1.3900 round-figure mark.”

“The 1.3700 level now seems to protect the immediate downside and is closely followed by support near the 1.3680 horizontal zone. Failure to defend the mentioned support levels might turn the pair vulnerable to slide further towards last week’s swing lows, around the 1.3610-1.3600 region.”