GBP/USD: Boris’ Reopening Insufficient Vs King Dollar As Stimulus Set For Sign-Off

King Dollar is back – as bond yields continue rising. Despite Britain’s vaccination campaign, sterling has lost some steam, with the market somewhat fearing tax hikes. US inflation figures are returning to the spotlight exactly as fiscal stimulus is set for a critical vote. In the UK, GDP and the reopening stand out.

This week in GBP/USD: All yield to the dollar

Dollar strength: Higher yields have remained the name of the game in currency markets, with every move in the US ten-year yields rocking the greenback. The world’s reserve currency advanced each time the global benchmark jumped above 1.5% and retreated when it hovered closer to 1.4%. Investors were closely following the Fed, data, and stimulus developments.

Jerome Powell, Chair of the Federal Reserve, refused to commit to curbing the rise in returns, only saying that the speed of the rise “caught my attention.” However, the bank continues seeing this increase as a sign of better growth prospects and said it is eyeing several measures of financial conditions. His reluctance to act sent yields and the dollar surging, knocking GBP/USD well below 1.40.

Where is the US economy heading? The week began with an upbeat note from the ISM Manufacturing Purchasing Managers’ Index, which pointed to red-hot activity and especially inflation. However, ADP’s jobs figures and ISM’s Services PMI already missed estimates, causing concerns on employment.

February’s Nonfarm Payrolls reports showed an increase of 379,000, more than double than expected and on top of upward revisions. The dollar reacted by extending its gains.

Stimulus: President Joe Biden ceded ground to moderates in his Democratic Party and agreed to limit the scope of the $1,400 stimulus checks. Markets had already priced some kind of compromise and raising the chances that the bill would pass added to increasing growth prospects. It also boosted yields and the dollar.

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