GBP/USD steadies around 1.3950, pound holds onto gains

• Pound retreats modestly versus US dollar still heads for the highest close in years.
• US dollar recovers some ground amid risk aversion.

The GBP/USD is about to post the highest close since April 2018 as it trades around 1.3950. Earlier on Thursday, it climbed to 1.3986, the new cycle high and then pulled back, finding support at 1.3925.

The correction from the top took place amid a recovery of the US dollar across the board. The greenback gained momentum as equity prices in Wall Street dropped further into negative territory. The Dow Jones is falling by 0.90% and the Nasdaq by 1.45%.

Economic data from the US came in mixed, having no impact on the market. Traders continue to focus on the US bond market and Wall Street. Data to be released on Friday includes UK retail sales, US home sales and global PMIs.

Pound still shinning

The pound continues to be among the top performers of the week. Expectations about the vaccination in the UK continues to be a key driver for the currency. On Thursday, comments from Bank of England policymakers did not stop the GBP/USD from rising further. Ramsden suggested there is room for more QE, and Sanders offered a not so positive outlook.

“Next Bank of England decision is March 18.  If the data disappoint in Q1, the bank may have to acknowledge more downside risks ahead and start talking more about expanding QE and less about tapering”, wrote analysts at BBH.

Technical levels