The GBP/USD pair will be affected by important events this week, including the announcement of jobs and wages numbers in Britain, and the testimony of Federal Reserve Chairman Jerome Powell. The pair had moved in a very narrow range before those events between the level of 1.3817 and 1.3877. The currency pair is still under downward pressure since settling below the 1.4000 psychological resistance. Despite this performance, the pound sterling is expected to rise against the euro and the dollar in the coming months, but a short-term pause in the currency's rise, as happened recently, should be expected.
“The UK is vaccinating much faster than the rest of Europe, which means, in tandem with the Brexit deal, the UK is outperforming the rest of Europe,” said Mickael Milhog, senior analyst at Danske Bank.
The developments in the pound sterling come as investors look towards the country's exit from the COVID-19 pandemic on a sustainable basis in light of the country's rapid vaccination campaign. Last weekend saw new records of vaccinations, with the UK now administering 29,859,742 doses, with 27,630,970 people receiving their first dose. In contrast, Eurozone countries are still struggling in their efforts to distribute the vaccine due to supply problems and an increasing reluctance among Europeans to take the AstraZeneca/University of Oxford vaccine.
Commenting on this, Niksch Sugani, an economist at Lloyd’s Bank, said: “COVID cases are on the rise in Germany and France leading to more stringent or extended containment measures, while the deployment of the vaccine has been much slower than in the United Kingdom and the United States.”
Also helping the British pound advance in recent weeks was the relief provided by the EU-UK trade agreement, which was guaranteed in December. "We expect that the Brexit agreement will ultimately reduce the uncertainty that has been burdening British companies in particular for many years now that the adjustment of the new relationship ends in the near term," says Milhogg, senior analyst at Danske Bank. .
The Bank of England maintained its economic outlook and cautious policies at its March meeting, thus largely ignoring the recent improvement in UK data and the successful COVID vaccine launch. This disappointed the bulls. Danske expects the GBP/EUR exchange rate to maintain the 1.15-1.14 range in the near term. Also, UOB Forex market analysts expect the GBP/USD currency pair to reach 1.38 in the second quarter of 2021, 1.40 in the third quarter, 1.41 in the fourth quarter of the current year, and 1.42 in the first quarter of 2022.
In the near term, the behavior and trends of the British pound could depend on where the data go and whether Britain is actually benefiting economically from the introduction of the vaccine. The coming days will be important in this regard given the large number of releases of UK economic data. The data calendar includes employment (Tuesday), inflation (Wednesday), PMI (Wednesday) and retail sales (Friday), all of which could lead to a strong and direct reaction to the Pound.
Technical analysis of the pair:
The bears are still sticking to the recent decline of the GBP/USD pair, and their impact may increase by stabilizing below the support level of 1.3800, which may provide opportunities for further movement towards stronger descending levels, the closest of which are 1.3770 and 1.3690. These levels are good buying opportunities. On the upside, I still see that the psychological resistance of 1.4000 will be the most important for the bulls to control performance again.
Today's economic calendar:
From Britain, average wages, the rate of change in jobless claims, the unemployment rate in the country, and statements by the governor of the Bank of England will be announced. US economic data, current accounts and the number of new US home sales will be published, and then the testimony of US Federal Reserve Chairman Jerome Powell will be released.
