GBP/USD has surpassed the previous 2021 peak of 1.4240, taking a peek at the highest since 2018, reaching 1.4250 before falling back to range. While the failure to hold onto the highs may embolden bears, cable has three reasons to rise, according to FXStreet’s Analyst Yohay Elam.
A drop in US inflation expectations could hit the dollar
“In response to the spread of the worrying B.1.167.2 variant first identified in India, authorities are ramping up the campaign, aiming to vaccinate 75% of the population by the end of the month. The biggest question for Brits and markets is if ‘Freedom Day’ – the full reopening planned for June 21 – remains in play. These recent developments raise the chances of returning to normal.”
“Bank of England Governor Andrew Bailey, speaks on Tuesday. Will Bailey boost the bulls? The UK economy is looking stronger, with falling unemployment and rising prices. Any hint toward the exits – ahead of the bank's decision later this month – could support the pound.”
“Have price pressures remained elevated also in May? The ISM Manufacturing Purchasing Managers' Index for May may provide some hints. Its ‘Prices Paid’ component hit the highest on record in April and could fall, strengthening the Fed's stance that inflation is only transitory. Randal Quarles and Lael Brainard, two governors at the Federal Reserve, are slated to speak later in the day and they may add to cooling down the dollar.”
“The first hurdle is 1.4250, which is the fresh 2021 peak and the highest in three years. It is followed by 1.4345 and 1.4365, levels last recorded in 2018.”
“Some support is at 1.4220, a swing high on the way up. Further down, 1.4170 and 1.4135 await GBP/USD.”