GBP/USD to rise as Powell is set to pressure the dollar

GBP/USD has been moving higher, nearing 1.41, in response to the UK's reopening plan and stable US yields. All eyes are now on Jerome Powell, Chair of the Federal Reserve, who testifies before Congress later in the day. Sterling is well-positioned to pull up as Powell is likely to weaken the dollar, Yohay Elam, an Analyst at FXStreet, reports.

Key quotes

“While investors prefer a quicker return to normality the government's cautious four-month exit scheme has been well-received by markets, which seem convinced that the current lockdown is the last. Moreover, the program receives broad support from the public, the opposition, the medical community – and also from the Treasury, which is set to extend its furlough scheme.” 

“The pound received a boost from labor figures. While the Unemployment Rate rose to 5.1% in December, that met expectations. On the other hand, wage growth accelerates to 4.7% yearly and the more recent jobless claims figure dropped by 20,000 in January, exceeding estimates.” 

“Will Powell soothe markets by promising to do more? That would lower yields but could also trigger fears of inflation. On the other hand, Powell can afford to cheer the current comeback in yields – seen as a healthy sign of the return to normality – in fear of a market meltdown.” 

“The fresh multi-year high of 1.4097 is the immediate cap. Further above, levels dating to early 2018 await GBP/USD – 1.4145, 1.4255 and 1.4370.” 

“Support awaits at the daily low of 1.4050, followed by 1.3980, and 1.3950, both stepping stones on the way up.”