- GBP/USD has been clinging to 1.41 after the UK officially postponed the last reopening stage.
- Vaccine optimism may help sterling stabilize ahead of US retail sales.
- Tuesday’s four-hour chart is showing bears remain in the lead.
“Now is the time to ease off the accelerator” – Prime Minister Boris Johnson has announced a four-week delay in England’s last reopening stage, to the dismay of some of the press. The PM took the decision in response to the rapid spread of the Delta COVID-19 variant, which is already causing an increase in hospitalizations. However, not all the news is bad.
First, Johnson provided some hope for a quicker reopening, before the current July 19 deadline. Secondly, the government is accelerating its vaccination campaign even further, and that should bear fruits relatively quickly.
Third, and perhaps most importantly, both AstraZeneca and Pfizer reported high levels of efficacy against this strain first identified in India. To reach these 90%+ rates of protection, two doses are needed, an area where Britain has been lagging behind. By shortening the period between first and second shots, there is hope for a quicker exit.
Despite lacking the desired full return to normal, the economy is on the right track according to the latest labor statistics. Britain’s unemployment rate dropped to 4.7% in April and no fewer than 92,600 people dropped off the lists of the unemployed.
Will it be enough against the dollar? Markets are anxious ahead of Wednesday’s critical decision by the Federal Reserve. Tapering the bank’s bond-buying scheme is high on investors’ minds, and so are prospects of higher interest rates.
The Fed and markets receive another significant data point ahead of that meeting – Retail Sales figures for May. The economic calendar is pointing to moderate changes after stimulus-related variations beforehand. However, there is room to be optimistic about the relentless US consumer.
All in all, the pound is well-positioned to weather any potential dollar strength.
GBP/USD Technical Analysis
While the currency pair tripped over the 200 Simple Moving Average on the four-hour chart, momentum is only marginally to the downside. Bears are in the lead, but bulls may still give a fight.
Pound/dollar faces critical support at 1.4070, a double-bottom formed in recent days, and it is followed by 1.4050, 1.4010 and 1.3980, all levels that were last seen in early May.
Resistance is at 1.41, which provided support early in the week, and it is followed by the daily high of 1.4030. Further above, 1.4185 was a high point last week.