GBP/USD: Sterling defies global gloom
GBP/USD has advanced amid vaccine hopes but suffered amid external tensions. The cable is now trading near the 1.28 level as the UK stats defeat global gloom. Coronavirus developments, Brexit, the Fed decision and US GDP are all eyed next week, FXStreet’s analyst Yohay Elam reports.
Key quotes
“Brexit talks were stuck, are stuck, and will likely remain so for another week. Nevertheless, low expectations do not mean lack of attention by markets, which will likely shrug off any reports about disagreements but may respond to a surprising breakthrough or if one side abandons the talks – a low probability event.”
“UK coronavirus headlines have fortunately been on the backburner as numbers continue falling. That would allow further gradual removal of restrictions, supporting the pound. A worrying increase in cases – as seen in some countries on the continent – would send sterling lower.”
“Investors will probably focus on coronavirus statistics, new restrictions in the states that are suffering, and easing in the rare places they are receding in. Several forward looking figures have already shown the economic impact of this second wave, and both soft and hard data will provide an updated view of the economy now.”
“The highlight of the week is the Federal Reserve's decision on Wednesday. The world's most powerful central bank will likely refrain from action once again after immense action beforehand. The Fed continues buying bonds and is committed to keeping low rates for longer. Jerome Powell, Chairman of the Fed, will likely urge elected officials to act and may be asked about the next steps and about the stock market rally – of which the Fed is the main underwriter.”
“The first release of Gross Domestic Product for the second quarter which is set to confirm a recession – the first since 2009. The economic calendar is pointing to a drop of 6.2 annualized but estimates vary widely. The economy squeezed by 5% in the first quarter. Apart from the headline figure, investors will pore into the details, with Personal Consumption and government contribution standing out.”