Sterling dips on Covid jitters

The British pound has edged lower in Tuesday trade. In the European session, GBP/USD is trading at 1.3842, down 0.27% on the day.

Dollar edges higher on Covid fears

The currency markets are in a holding pattern, as investors cast an eye to Friday, when the US releases Nonfarm Payrolls. The dollar index has managed a slight gain on Tuesday, rising 0.21% to 92.06. The British pound dropped below the 1.39 line overnight. With concerns growing over the resurgence of Covid in Europe, the UK, and Asia, risk appetite has fallen, which has pushed the US dollar slightly higher. If pandemic blues worsen, the greenback could add further gains.

On the data calendar, UK releases are limited to tier-2 events. Net Lending to Individuals is expected to rise sharply to GBP 6.9 billion in May, up sharply from 2.9 billion previously. A strong jump would point to an increase in economic activity, with consumers taking on more credit. On Wednesday, the UK releases GDP for Q1, which is expected to show contraction – the consensus is -1.5% m/m and -6.5% y/y. These second estimate readings are expected to confirm the initial estimates, which means the pound’s reaction should be muted unless the forecast is wildly off target.

In the US, consumers remain optimistic about economic conditions. The CB Consumer Confidence index is projected to accelerate in June, with a forecast of 119.0, up from 117.2 beforehand. This confirms the trend seen on Friday from UoM Consumer Sentiment, which rose in June to 85.5, up from 82.9 previously. The UoM report found that with the US recovery in full swing, close to 75% of consumers surveyed expect interest rates to rise in 2022. This was the highest proportion since 2018.

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GBP/USD Technical Analysis

  • There is resistance at 1.3993, protecting the symbolic 1.40 level. Above, there is resistance at 1.4105
  • On the downside, 1.3778 is the first level of support. This is followed by a monthly support line of 1.3675

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.