The GBP/USD rallied sharply to touch multi-month highs. The currency pair has outperformed expectations to levels not seen since April 2018, on Wednesday.
GBP/USD Moves Higher
GBP/USD is trading above the psychological resistance at 1.41 levels. It crossed the 1.42 level during trading hours on Wednesday but retraced back to 1.41 levels at close.
The British pound against the US dollar touched a high of 1.4240 on Wednesday, 24th February 2021, and continues its positive streak on Thursday. The Bull Run continues despite no big news to create such momentum say, experts. Risk appetite is keeping the sterling higher, along with economic recovery in the UK.
It is the seventh consecutive week of positive movement in the GBP/USD, and bulls have managed to move the currency pair towards the April 2018 high. Economic recovery is better than expected and has strengthened investor interest in the sterling, pushing it higher against a broad basket of currencies.
The GBP/USD touched a high of 1.4370 in April 2018 and later moved down to touch a low of 1.1410 in March 2020, to levels reached during the pandemic.
Even if the GBP/USD currency pair moves lower, the levels at 1.3720 will be strong support, as it was a stiff resistance that the currency pair broke through in February 2020.
The Daily SMA 200 is placed at 1.3110 for the British pound against the US dollar. Weakness in the US dollar is helping the Sterling. The US dollar index is working hard to retain the 90.00 level. If it loses support and moves to 89.75, it may strengthen the GBP/USD further.
The UK to Exit from Lockdown Restrictions
The vaccination drive is helping the UK economy regain fast momentum. Coronavirus statistics show improvement in infections, and it is keeping the economy buoyant.
UK Prime Minister Boris Johnson has set 21st June as the deadline for total unlock, but the economy may ease restriction even earlier. A four-step plan to ease lockdown measures by the government will help to reach the target set by the PM say, experts.
The approval of the AstraZeneca vaccine has helped the economy to recover faster in 2021. The UK has been one of the first countries to implement vaccination, which has helped to curb infections and remove restrictions. It has moved the GBP/USD currency pair towards the April 2018 highs by gaining strong momentum for almost two months.
However, new Covid variants have been identified in several parts of the UK slowing down the lockdown removal process.
British Economy to Move Forward
The UK economy is showing signs of picking up after the massive coronavirus attack affected the country.
Bank of England’s Gertjan Vlieghe said on Monday 22nd February that interest rates may continue to stay at historic lows for a longer period. Investors had, however, expected a hike in interest rates due to the quick recovery in the economy.
The Unemployment Rate in the United Kingdom is slightly higher at 5.1%, while it was 5.0% in November. It is 1.5% higher than the previous year, according to the Office for National Statistics. Unemployment is at a five-year high in the United Kingdom.
The furlough scheme has prevented an increase in job-losses during the lockdown, and it has to continue, say those in the business circle.
The Average Earnings Index for the three months ending December is higher at 4.7%, while previously, it was at 3.7%. The average earnings for those in work have been higher during this period, though job losses prevail.
Many experts campaign that the chancellor should extend the furlough scheme and protect workers from further job losses. Workers aged below 25 have felt the highest impact of unemployment during the crisis, which also accounts for three-fifths of fall in employment, according to January data.
The Brexit deal has helped the economy to recover faster, though there was much to be sorted out between officials. The economy has recovered better than expectations say, analysts.
The ¥150 level has been a strong psychological barrier that the GBP/JPY managed to break on Thursday 25th February. Experts, however, predict a massive correction. But if the sterling against the yen can gather steam, it will continue its spike upwards. The area at ¥145 will be strong support on the downside.
The EUR/GBP has been on a downtrend, with growing strength in the British pound. The euro has moved lower against the sterling to touch February 2020 lows. The EUR/GBP slid to 0.8550 levels during trading hours on Thursday 25th February, but recovered later, moving above 0.8600 levels.
US Dollar Index
The huge stimulus package in the United States will weaken the US dollar further, say experts. As long as the ten-year Treasury yields are below 1.50%, the US dollar is expected to remain lower.
The $1.9 trillion stimulus news is to be announced on Friday, and investors await the stimulus news as it will negatively affect the US dollar.
Interest rates will stay lower for a longer duration, says Fed Chairman Jerome Powell. Risk-sensitive currencies like the Australian dollar, the New Zealand dollar, and the British pound have moved to the highest levels since 2018. The Japanese yen has moved lower, as it is a safe-haven asset.