The GBP/USD has today risen its best levels since April 2018 as investors continue to pile into the racier pound and out of the US dollars amid ongoing “reflationary” and “risk-on” trades. The pound has been pushing up across the board since the turn of the year due to a no-deal Brexit being avoided and the UK is currently well ahead of many countries in the race to vaccinate its population. Together, these developments have boosted expectations that the UK economy could potentially recover quicker and stronger once lockdowns end.
Barring a sharp rise in US CPI this afternoon, the GBP/USD may be able to rise more as the US dollar potentially falls further.
With the cable making higher highs and higher lows, it could be headed toward $1.40s next:
Source: ThinkMarkets and TradingView.com
The path of least resistance is clearly to the upside and dips back to support such as 1.3800 and 1.3750 likely to be defended going forward. The latter is now the most important support to watch, having been a significant resistance level in recent trade.
The bullish bias on the cable would remain intact until such a time that rates make their first lower low. The last significant low was formed at 1.3567 earlier this month and that level is now the line in the sand for me.
From a macro point of view, the GBP/USD will remain in focus as we have the latest US CPI and speeches by Fed Chair Powell and BoE Governor Baily all coming up later. Then on Friday, we will have some important domestic data such as UK GDP, construction output and manufacturing production.
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