- GBP / USD extended yesterday’s strong recovery from several week lows.
- Optimistic market sentiment weighed on the safe haven dollar and remained favorable.
- Speaking of negative BoE rates, the uncertainties linked to Brexit could limit any significant gain.
GBP / USD maintained its strong bid tone for the first part of Tuesday’s trading session and was last seen near multi-day highs, mid-1.2200.
The pair built on yesterday’s strong short intraday hedge movement by more than 150 pips from the seven-week lows and gained ground for the second consecutive session on Tuesday. The positive momentum was fueled by follow-up sales around the US dollar, which remained on the defensive in the wake of the prevailing risk climate.
The sense of global risk has been well supported by recent optimism about the loosening of global lock restrictions and has gained an extra boost by encouraging data from trials of coronavirus vaccines. US drug maker Moderna announced positive results from a phase 1 clinical trial for its coronavirus vaccine on Monday.
Intraday buying interest accelerated at the start of the European session, following the publication of mixed monthly employment details in the UK. According to data released on Tuesday, the UK unemployment rate unexpectedly dropped to 3.9%, which largely offset a larger than expected increase in the number of people applying for unemployment benefits.
Meanwhile, fears about the second wave of coronavirus infections and worsening US-China relations have helped limit losses in USD. This, combined with growing expectations about negative BoE interest rates and the lack of progress in Brexit negotiations, could prevent a galloping rally for the British pound, at least for now.
Therefore, any subsequent positive movement back to the breakpoint of the support for the double vertex neckline near the region 1.2290-1.2300 could still be considered a sales opportunity. It is therefore prudent to wait for a sustained force above the support that has become resistance before positioning yourself for a new appreciation in the short term.
In the future, market players are now impatiently awaiting the publication of data from the American housing market – Building permits and housing starts – for a new impetus. This will be followed by Fed President Jerome Powell and the testimony by Congress of US Secretary of the Treasury Steven Mnuchin, which could generate significant business opportunities.