Market Analysis – GBPUSD
Today, during the Asian session, the GBPUSD pair is strengthening by 20 pips, staying around the new recent highs from March 19, renewed yesterday. Now, the Pound is trying to stabilise above the level of 1.3900, which was crossed towards the end of yesterday’s session. It is important the Pound is able to stabilise and maintain gains above significant price levels, particularly as the US Dollar has received strong drivers from the employment sector. Investor activity is gradually recovering from the Easter holidays, and traders are keen to see if the sentiment changes now that the market is in full swing.
Strong macroeconomic statistics from the US, released on Friday and Monday, supported poor optimism in the market, though it should be noted this has not yet materialised in terms of the price trend. This is why it is vital traders are analysing both the developments in the market and the price movement. The US Dollar is weakening amid poor performing yields in government based investments, such as 10-year Treasury Yields. The US Dollar is taking a hit from a change in risk sentiment while traders focus more on riskier assets such as stocks and indices. Meanwhile, the Pound is strengthening amid a sharp improvement in the epidemiological situation in the country.
American investors are focused on comments from Treasury Secretary, Janet Yellen, and US President, Joe Biden’s, plans to develop national infrastructure. Yesterday, Janet Yellen announced the need to harmonize the level of minimum tax levies from corporations around the world to deter companies from moving to countries with lower taxes. She noted that she is already discussing this issue with representatives of the states that are members of the G20. Last week, the presidential administration announced a corporate tax hike from 21% to 28%.
The proposals to modernize the infrastructure of $2Trillion did not suit Republicans in Congress. They said they would not support such a large waste of funds, and suggested limiting allocating $615B for the urgent needs of modernizing roads and bridges. Though, the Republicans have little chance of opposing the Democrats who control congress, if the senate is unable to agree on the proposal, there is a chance of further strain on the currency until there is a definite decision; we saw a similar strain on the Dollar during the previous stimulus package.
Traders expect the British economy to gradually open over the next week. Against the background of record rates of vaccination of the population, and a stable decrease in the incidence rate, according to the authorities’ estimates the economy is ready for further steps to remove restrictions. Over the next week, hairdressers, beauty salons, gyms, community centers, and parks are expected to be allowed to open. Also, members of the same family will be allowed to take vacations in the country, subject to the use of separate housing. Also, the market is waiting for clarifications on the use of vaccination certificates, the introduction of which caused a negative reaction among many residents.
When looking at the US Dollar over the last 24-hours, it is weakening against its main competitors including against the Euro, Swiss Franc, and Japanese Yen. Though it should be noted that even though the US Dollar is weakening against the Pound during this morning’s Asian Session, when looking at the US Dollar Index we can see that the currency is strengthening overall against the market in general. The Pound is strengthening against its main competitors including the Euro, Yen, and Australian Dollar.
Resistance levels: 1.3924, 1.4000, 1.4050, 1.4100.
Support levels: 1.3857, 1.3800, 1.3760, 1.3700.