GBPUSD becomes the first major updated highs

Since last Thursday, the British pound has been performing better than the market since the Bank of England eased expectations of negative rates anytime soon. These comments put GBPUSD back on an upward path. The weakening US currency is mostly behind the rise in GBPUSD and the general demand for risky assets from Friday.

The general surge in demand for risky assets (GBPUSD is very sensitive to investor sentiment changes) and the upbeat economic statistics are on the pound’s side.

The latest data for Feb 7th showed that 12.3M people received the first dose, and more than half million – the second. Widespread vaccination, coupled with a tight lockdown, is bearing visible fruit. The seven-day moving average of new cases has collapsed by more than three times since the start of the year. New fatalities from coronavirus peaked a couple of weeks ago and are now 30% lower (we use the 7-day average to smooth out the fluctuations).

This progress allows us to be optimistic about the outlook for the economy and consumer activity. It pushes expectations that the Bank of England will put less pressure on the monetary easing pedal.

Unless we see a sudden market reversal due to new strains or other surprises, GBPUSD is capable of moving very quickly into the 2018 peak area, i.e. above 1.4300, as from technical analysis, there appear to be few obstacles to growth before these levels. By the end of the year, the pair can strengthen to levels above 1.4700.

The FxPro Analyst Team