GBP/USD Set To Suffer Below Support As Dollar Also Gets Two Shots In The Arm

  • The dollar is gaining ground as President Biden may eventually pass a large stimulus bill and yields are rising.
  • America’s vaccination campaign is catching up with Britain’s, also supporting the greenback and weighing on GBP/USD.
  • Wednesday’s four-hour chart is pointing to further losses for cable.

Pounds, Money, Safe, Means Of Payment

Any positive thing has to come in the right dosage – America’s stimulus package may be larger than expected and that is weighing on GBP/USD after boosting it earlier. The US dollar has been gaining ground as investors sell Treasuries in response to higher prospects of a generous relief package (FXB, UUP).

Senate Democrats have advanced a partisan reconciliation bill, taking the first step in potentially approving President Joe Biden’s proposed $1.9 trillion stimulus package. The move on Tuesday surprised markets after the Commander-in-Chief met a group of ten Republican lawmakers who offered a counter proposal of only $600 billion. The unilateral move by Biden’s party raises the chances for “going big” – support worth closer to the upper edge.

The prospects of more robust US growth – as well as elevated debt issuance – weigh on bonds and the resulting higher yields make the greenback more attractive. Moreover, America’s economy is getting a shot in the arm from a ramped-up vaccination campaign. Pharmacies are set to begin administering vaccines next week while both Pfizer and Moderna also upgraded its forecast for delivering doses of the vaccine.

The UK is mostly reliant on AstraZeneca’s (AZN) immunization solution, and there is good news on the front as well. Britain’s bet on a three-month gap between the first and second inoculations has proved more efficient than a tighter timetable. That would allow reaching more people quickly, boosting the economy. Will this upbeat news boost sterling? That remains an open question.

On both sides of the pond, coronavirus cases and hospitalizations are declining, keeping a tight race. Apart from the vaccine and political developments, pound/dollar is set to move in response to two top-tier US data points. ADP’s labor figures are projected to show a small increase in private-sector employment, while the ISM Services Purchasing Managers’ Index is forecast to edge lower. Both statistics serve as leading indicators toward Friday’s Nonfarm Payrolls.

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