GBP/USD Forecast: Third Time’s A Charm? Why A New Attack On 1.37 Might Succeed

Is the severe British lockdown bearing fruits? That could serve as a tiebreaker for GBP/USD, which has tackled 1.37 twice and may pierce higher.

Coronavirus cases have been dropping from the peak, providing hope that deaths – which have hit record highs – will decline as well. The decline in infections would also alleviate pressure on overstrained hospitals and calls by the opposition for even tighter restrictions.

(Click on image to enlarge)

Source: FT

So far, cable has been pushed and pulled by two opposing forces. Starting from positive UK developments, the vaccination campaign continues at full speed, hitting 4.52% of the population – the highest in the Western world. Moreover, Britain begins administering jabs in pharmacies on Thursday, potentially accelerating the pace.

Investors are looking beyond the current misery and to the future. The faster a country inoculates its population, the quicker the economic recovery.

Focusing beyond the current hardship is also the name of the game in the US. According to reports, President-elect Joe Biden is set to present a large $2 trillion relief package – more than expected. The news has been pushing investors to stocks and away from bonds – resulting in higher yields. In turn, elevated returns on American debt boost the greenback.

The ball is now in the Federal Reserve’s court. Will it buy additional bonds, pushing yields and the dollar lower? Jerome Powell, Chairman of the Federal Reserve, speaks later in the day and he may opt for taking the other direction – gradually tapering down the bank’s support, as the economy needs less of it. His colleagues at the Fed have been mostly rejecting the option of purchasing fewer bonds – but the focus on optimistic forecasts is supporting the dollar.

Back to the grim present, investors will watch updated UK covid statistics and also US jobless claims, which are set to remain at the highs around 800,000.

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