Market Analysis – GBPUSD
The Pound this morning is showing a slight decline against the US Dollar which is showing an increase across the market. Yesterday saw a strong upward trend where the asset increased by over 90 pips in one trading session. However, when looking at the larger picture, the instrument over the last 10-days has been largely undecided due to a lack of direction and continued price corrections forming. Yesterday brought the price again to a previous resistance level and traders are evaluating the current price movement in an attempt to determine whether the price will decline again due to being overbought, or if the instrument can keep up the momentum.
The US economic data published in the last 24-hours turned out to be a mixed bag, which can be interpreted with different perspectives. According to a second preliminary estimate, the US economy grew by 6.4%, less than the 6.5% expected. Nevertheless, the acceleration in growth was still significant, as in Q4 2020, GDP increased by only 4.3%. The number of initial jobless claims fell again more noticeable than the market expected, from 478K to 406K, but the total number of citizens receiving benefits increased from 3,640 to 3,642 million. Generally, the situation on the labor market continues to improve, but is still far from pre-crisis.
It is also worth noting that, yesterday the US and PRC trade negotiators carried out the first telephone consultations under the current US administration. In a statement from the Chinese side, they were described as “candid, pragmatic, and constructive”, but the details of the negotiations were not announced. Most likely, it was a question of purchasing American products, since China is lagging behind the agreed plan in this matter, though it has been rumoured that the new president is likely to be more lenient than the previous administration.
The UK is quite optimistic about the removal of a significant part of quarantine restrictions, as well as widespread vaccination, which has already covered about 70% of the UK population. However, the full reopening of the British economy is still questionable due to the emerging Indian strain of the coronavirus in the country. UK Health Secretary, Matt Hancock, said it was too early to say if the UK economy could fully resume on June 21 as previously planned, as the new strain has already spread across the country. The minister also noted that the coronavirus vaccine was not 100% effective, since every tenth sick person has already been fully vaccinated. Due to this, many individuals are questioning whether the vaccine will be effective in the longer term as the virus continues to form different variants. Under these conditions, the next two-to-three weeks will be decisive. If the situation worsens, a new easing of quarantine measures may be postponed.
It is also vital not only to analyse the price movement of the GBPUSD, but also the conditions of each individual currency. The US Dollar Currency Index today is showing a slight increase after yesterday’s small decline. The British currency is strengthening today against its main competitors the Euro, the Yen, and the US Dollar. In addition to the bullish movement today, the currency also witnessed a large increase in the exchange rates the day before.
No major news is due to be released for either the US or the UK. Scheduled today are seven less important figures and reports from the US at the opening of the US Session. These reports include the Chicago PMI as well as the Core Price Index, though the market is likely going to be looking mainly at next week’s NFP Friday predictions.