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UK COVID Lockdown Counters Brexit Trade Deal Enthusiasm

GBP
MNI (London)
  • GBP/USD posted an early 2021 high at $1.3704 Monday in post Brexit trade deal enthusiasm only to reverse sharply to $1.3542 as country moved back into lockdown.
  • Recovery through Tuesday and Wednesday saw rate edge back up to $1.3671, risk gaining a boost on result of the US Georgia Senate run off, before the USD corrected sharply in NY with rate again meeting support into the $1.3540 level.
  • Events on Capitol Hill led to fresh USD sales which allowed GBP/USD to nudge back to $1.3626, closing the day at $1.3609.
  • Early Asia continued the pressure on the USD and edged rate to $1.3633 before momentum faded followed by a sharp reversal to $1.3573. Recovery saw rate edge to $1.3609 but struggled to hold gains, trading back toward $1.3580 into Europe.
  • COVID lockdown, along with a released MNI interview suggesting BOE has discussed negative rates with banks and pension companies, seen providing the counter to further GBP/USD gains. However, vaccine roll out does provide some hope.
  • UK Construction PMI provides domestic data interest. US Weekly Jobless Claims, Trade Balance and Non-Mfg ISM provides afternoon data interest.
  • Fall out from the events on US Capitol Hill to be watched.
  • Support $1.3540/35, $1.3510-1.3495. Resistance $1.3610, $1.3670/80, $1.3704.
  • MNI Techs: GBPUSD is largely unchanged. The pair failed to hold onto the session highs Monday and closed down on the day. The outlook is bullish though following the recent clearance of key resistance at 1.3624, Dec 17 high. The break reinforces a positive trend structure and opens 1.3712 next, Mar 1, 2018 low. On the downside, firm support lies at 1.3430, Dec 28 low and 1.3304, Dec 22 low. Initial support is at 1.3512, the 20-day EMA.
MNI London Bureau | +44 203-586-2231 | john.webb@marketnews.com
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MNI London Bureau | +44 203-586-2231 | john.webb@marketnews.com
BulletMarketsForeign Exchange Bullets

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