GBP/USD: Upbeat UK CPI and vaccines hopes delights bulls

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GBP/USD has been advancing amid coronavirus vaccine hopes and upbeat UK CPI but Britain’s relations with China and Brexit uncertainty may weigh on sterling, according to FXStreet’s analyst Yohay Elam.

Key quotes

“The British government decided to phase out its dependence on Huawei amid concerns about having backdoors to the Chinese army. Beijing responded angrily and stated that the UK breached promises, accusing it of political manipulation.”

“Back in the days of the Empire, Britain held onto Hong Kong, and the city-state is another point of contention. Prime Minister Boris Johnson opened the door to receiving mass immigration from HK, a response to China’s tighter grip on the territory.” 

“Brexit talks remain deadlocked, with progress expected only closer to the year-end, when the transition period expires.”

“Pound bulls may be encouraged by the stronger-than-expected increase in annual inflation. CPI rose by 0.6% yearly, showing stability and a lower chance of disinflation. Nevertheless, Silvana Ternyero, a member of the BoE, said that she would vote for further stimulus if needed.” 

“GBP/USD has been benefiting from dollar weakness, stemming from hopes for a coronavirus vaccine. Moderna, a Massachusetts-based pharma firm, reported further progress in developing immunization after 45 humans developed a robust level of antibodies.”

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