The British pound has reversed directions on Thursday and posted slight gains. Currently, GDP/USD is trading at 1.3759, up 0.16% on the day.
It has been a week of sharp swings for the pound. The week started with GBP/USD punching above the 1.39 line, but the pair could not hold on to these gains and fell close to the 1.37 level, before steadying on Thursday. Investors ditched the pound as the AstraZeneca vaccine remains under scrutiny. The European Medicines Agency said there was a possible link with rare blood clots, and the UK responded by saying it would offer alternatives to AstraZeneca. This led to GBP/USD and EUR/GBP recording sharp losses during the week.
Overshadowed by the news over AstraZeneca were fine performances by UK PMIs for February. On Wednesday, Services showed strong growth, as the PMI accelerated from 49.5 to 56.3, well above the neutral 50-level. This was followed by a sparkling Construction PMI, which jumped from 53.3 to 61.7, its highest level since September 2014.
A successful vaccine rollout in the UK has allowed the government to continue lifting health restrictions, which is boosting economic activity.
The FOMC minutes reiterated that the Fed remains in dovish mode, despite the improvement in the US economy. Policymakers at the Fed remain firmly of the view that the US economy still requires support until the recovery has deepened. With significant slack in the economy, inflation remains at low levels. The Fed believes that any rise in inflation due to improving economic conditions will be temporary. There had been some speculation that FOMC members might hint at a tapering of QE, given the sharp improvement in employment numbers, but the minutes made clear that any tapering of QE is off the table for the time being.
GBP/USD Technical Analysis
- On the downside, GBP/USD continues to test support at 1.3742. Below, there is support at 1.3650
- 1.3889 is the next resistance line, followed by resistance at 1.3944
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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