GBP/USD ?????????? ?? 1.2975 - UOB
Forex News

GBP/USD holds steady in 1.2460s, awaiting UK data this week

  • GBP/USD holds relatively steady as market attention is on oil prices plummeting to zero.
  • All eyes on the UK data this week, and an ear to the ground for hard-Brexit rhetoric. 

GBP/USD has been holding in a relatively tight range on Monday between a low of 1.2416 and a high of 1.2499. Markets are sidetracked by the movements in the price of oil which has dropped to a historical low of the front-month contract of $0.01 (that is not a typo – one cent). COVID-19 is tearing through the world economies which gives rise to the prospects of a global recession and a firmer USD. 

The Great British Pound will fall short of bullish expectations in a climate of sinking global growth, especially with Brexit tensions in the mix. The UK’s current account deficit is a long term enemy of the pound, leaving it highly vulnerable to the downside should another market shock occur, forcing the US dollar higher. We have seen some volatility in the US, but overall, there appears to be broad demand for it despite the slew of Fed measures aimed at helping offshore USD liquidity which capped the rally in the USD during the market turmoil.

Eyes on the economic data this week

Meanwhile, net GBP long positions dropped for a sixth straight time last week. The UK’s current account deficit leaves GBP vulnerable particularly given that Brexit tensions are back in the headlines. However, for the immediate future, it is the economy that markets will be watching.

March and April will be terrible data pertaining to the sharp drop in business activity as a result of the COVID-19 shutdowns. We have critical March Retail Sales this week as well as April PMIs. However, it should be noted that this is a global crisis so it may not lead to a significant drop in GBP vs its rivals. Wha could be the nail in the coffin for the pound would likely relate to hard Brexit sentiment again. We have heard a number of comments from UK government officials that have shored up the notion that the Tories are not going to accept trade talk extensions beyond 2020. 

The major risk to GBP/USD is a sudden spike in COVID-19 cases, with the curve still not notably peaking which means there is a high risk that lockdowns could last longer than expected. Bankruptcies and bad loans could be the trigger for next wave of selling in markets and a scramble to the USD again. 

GBP/USD levels

 

Source Link