GBP/USD Still Bullish as Markets Cheer UK Economy’s Reopening
Aiswarya Gopan • 2 min read
At the start of a brand new trading week, GBP/USD is holding steady as markets focus on the optimism surrounding the reopening of the British economy after its latest round of lockdowns. At the time of writing, GBP/USD is trading around $1.408.
The sentiment has turned positive among Sterling traders after the UK government allowed cafes, restaurants and bars to resume indoor service and reopened its borders to allow for international travel once again. This has boosted investor confidence that the economy could witness a strong rebound from pent-up consumer demand in the coming weeks, which in turn has helped GBP/USD trade bullish.
In addition, the BOE’s plans to taper asset purchases have also contributed to the upbeat sentiment surrounding GBP/USD. Analysts expect the GBP to enjoy more gains in the near-term over optimism about economic recovery and the possibility of a Scottish independence vote being delayed.
The Cable has also benefited from a weakness in the US dollar lately, amid considerable uncertainty in markets about the Fed’s reaction to inflation spiking as the US economy recovers. While some analysts had turned hopeful of the Fed hiking interest rates soon, recent data releases have revealed signs of strain in the economy and bolstered the central bank’s prediction that the monetary easing would be needed for a longer period of time.
While the reopening of the UK economy has brought reason to cheer and strengthened investor interest in the Sterling, GBP/USD could face some pressure about the latest variant of the coronavirus B.1.617.2 which is likely to spread faster. There are also some concerns that current vaccines may not be effective enough to prevent the transmission of this virus.