UK unemployment surged to a record high in five years
The poor labor data in combination with technicals pointing to the overbought area, GBP/USD has all chances to pullback down.
British pound is on rise
2020-09-01 • Updated
GBP/USD is climbing upward. The break out above 1.3500 will drive the pair to multi-year highs.
The massive sell-off of the US dollar and the current risk-on mood are driving the British pound higher and higher. That helped GBP/USD to reach levels unseen since December of the last year at 1.3460. As for the greenback, the Fed’s Powell announced last week that interest rates will stay at low levels for longer, which hit hard the already weak USD. The Fed’s dovish statement has been reinforced by yesterday’s speech of vice Fed chair Richard Clarida.
Speaking about the upbeat market sentiment, this morning the Chinese manufacturing PMI came out better than analysts expected. As you may know, investors pay closer attention to China’s economic indicators as they assess how fast the global economy may recover. Therefore, positive Chinese data improved the overall market mood.
In addition, AstraZeneca, the biotech company based in Britain, is planning to hold 50 000-strong trial for its Covid-19 vaccine candidate. It’s said that this firm has one of the highest potentials to create an effective vaccine and save the whole world from the pandemic.
An interesting fact that the British economy itself hasn’t had any significant influence on the pound. Moreover, investors shrugged off the Brexit uncertainty, concerns over more UK redundancies, and rising infections. The global optimism has taken hold.
Tomorrow the governor of the Bank of England will deliver a speech about the economic impact of coronavirus. As a rule, if the central bank is hawkish, the pound will rise. Otherwise, if the central bank is dovish, the pound will drop. Follow the report at 16:00 MT time on Wednesday and join the market flow!
Technical tips
GBP/USD is trading just below the key resistance of 1.3500. If the pair breaks it out, the way to the high of September 2017 at 1.3550 will be clear. In the opposite scenario, the move below yesterday’s low of 1.3300 will drive the price lower to the next support of 1.3180.
Kseniya Medik
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